Teach your teen financial responsibility

Your teenage kids may be old enough to get a part-time job and start taking college prep exams, but do they know how to manage their money?

Parents can get their teens started on the road to financial literacy by taking advantage of ways to teach them concepts like making a budget, balancing a checking account, using credit wisely or saving for retirement.

That's because parents can have the biggest influence on their children's behavior when it comes to personal finance, says Patricia Seaman, senior director of the National Endowment for Financial Education, a nonprofit focused on financial literacy.

"Even if you don't feel like you know enough or feel you were raised in a money-savvy environment, you still can overcome that and give your kids a good foundation," Seaman says.

Here are ways to instill your teens with money-management skills for college and beyond:

Cover the basics early: Personal finance education should ideally begin when children are in elementary school. This is a good time to establish an allowance, say for doing chores around the house.

One strategy is to get kids to regularly save some of their allowance, and donate another portion to church or a charity of the child's choosing.

When a child is between 5 and 10 years old, it's an ideal time to set them up with a child savings account. Many banks offer savings and checking accounts tailored for young children as well as teens.

Financial responsibilities: It's important to hold teenagers accountable for their financial choices. This could take several forms, like requiring them to pay for their own monthly mobile phone subscription or the online account on their video game console. Money management lessons can be found by giving teenagers a clothing allowance and letting them buy their school clothes on their own.

Teen retirement account: Youth is an advantage when it comes to maximizing returns in a retirement account. Once a teen lands a job -- an allowance won't do -- open a Roth IRA, or individual retirement account for them to contribute to.

Credit use: Managing credit card debt and spending can be a major problem for many borrowers, but especially young cardholders.

Kids younger than 18 are not allowed to open a credit card account on their own, though use of prepaid cards in high school can help establish good spending habits.

Parents with kids going away to college may want to add the student to their card to cover books or emergency expenses. But a shared card account also can help parents keep tabs on their kids' spending and payment habits.

Car buying lesson: Rather than handing them the keys to a car on their 16th birthday, get teens involved doing all the homework that goes into a car purchase. Ask them to compare different models according to features such as price, projected maintenance costs and mileage. And have them call insurers to find out how much coverage will cost.

Household finances: Give teens a closer view of household financial decisions. Walk them through the monthly bills and let them see how much is spent to keep the heat and the cable TV on, as well as funding retirement accounts and debt payments.

To help frame the money management conversation, the National Endowment for Financial Education has a booklet that can be downloaded for free at www.hsfpp.org.

And for teens nearing graduation or headed for college, check out www.cashcourse.org/prep. The site, also run by NEFE, explains a bevy of financial issues, from budgeting and financial planning, to setting financial goals and planning for retirement.