As your children grow into young adults, you can help them learn how to manage their own finances. Here’s how to go about it.

While it’s important to start teaching your kids about money when they are young, it’s even more important as they get older.

In high school, they should be gaining direct experience with financial topics, such as earning, borrowing, lending, donating and investing. Hopefully, by graduation they have developed a healthy attitude concerning spending and saving and a sense of how to make sound financial decisions.

In college, they will need to be able to handle course work, health care and finances. The last one may be harder than you’d think. I remember the disastrous outcome for some of my friends in college when some credit-card companies came to campus. It didn’t take six months for some students to run up crippling credit-card debt and ruin their credit ratings.

I suggest that parents start slow, gradually giving their kids some control over their own finances by the time they reach their teens. With the bank of Mom and Dad, their mistakes have lower consequences, but these early lessons can be just as meaningful.

Below are some areas where you can focus your efforts.

Earnings or Allowance?

A generation ago, it wasn’t uncommon for American teenagers from all walks of life to do some paid work while in school or over the summer. Whether it was stocking shelves and delivering groceries, working in mom or dad’s office, or babysitting and tutoring younger children, learning the value of your own labor was part of growing up. Now only about 35% of 16- to 19-year-olds work, according to U.S. Census data from 20161. That’s down from 58% in 1979. Teenagers today are spending more time in school and working on other (unpaid) activities to prepare for college or bolster their application.

If having a regular job during the school year isn’t practical for your teen, I recommend structuring a set allowance. It should be based on how much your child reasonably needs each week for food, transportation and clothing. Give them the freedom to spend the money as they wish and don’t act as a backstop for cash if they run out by the end of the week. The goal is to avoid simply handing out $20s as needed and enforce some budget discipline.

Ron Lieber, a money columnist at The New York Times and author of The Opposite of Spoiled, recommends encouraging kids to divide their allowance into three buckets; saving, spending and giving. That approach makes sense to me, because it drives home their responsibility to think about their future and their community, and the need to make spending decisions with that in mind.

Banking

Your children should have their own savings account by high school (I recommend setting one up when they are in grade school). In high school, you can expand the bank account to include a checking account, with a debit card. Look for accounts that have mobile check-deposit features and electronic person-to-person payments, which can come in handy if you need to get them money in a hurry.

At some point during college, they should get their own credit card to start building a credit history, ideally paying the full balance monthly, rather than carrying any revolving debt balance. Earlier this year, polling by Ipsos and Sallie Mae found credit card balances among students 18 to 24 averaged over $1,000,2 which increases the potential for impaired finances out of the gate.  Most critical is that they understand that their debt is their responsibility and that there are serious consequences if they don’t keep it under control.

Managing Debt

Learning how to handle debt is an essential financial skill that kids can learn early. You can help your child get started down that road by lending them small amounts, perhaps as an advance against their allowance.

If you lend them money for a larger purchase, such as a used car or new laptop, consider charging nominal interest so they get used to the concept. This can be as simple as lowering their ongoing allowance by a small amount until any advance has been repaid, with the amount of the decrease not counted against the amount owed. Such an approach mimics a ‘minimum payment’ option on revolving debt. One day soon they will be responsible for their own finances, and they should understand how carrying debt reduces their disposable income.

Transferring Costs

Eventually, you will have to wean them off expenses you cover initially, such as car insurance, family mobile phone plans or the use of a ride-hailing app.

If you can afford it, consider waiting until after college, once they have a full-time job and the financial means to handle those expenses on their own. While they are in high school and college, you may be glad to provide certain services that will help keep them safe and in contact.

Investing for the Future

When your child accumulates some savings or gets gifts of cash, perhaps at graduation, it may be a good time to talk to them about investing. Encourage them to think about setting long-term goals and investing regularly over time. You may be able to set up a low-minimum brokerage account for them and convince them to add to it over time.

There is no better incentive for financial rectitude than watching your savings earn for you. One day, that account and the behavior it incentivizes may be the foundation for the financial independence you want them to achieve.