We’ve all heard the horror stories: young people who graduate from college, move back home with their parents, make very little money and mishandle the cash they do earn.
As many as 40 percent of millennials still receive financial help from their parents, according to 2015 statistics from a Bank of America report. A recent Pew Research Center study found that 32 percent of young people ages 18 to 34 lived with parents in 2014, compared to 20 percent in 1960.
While it’s never too late to teach young people to budget, you also can’t start too early. If you don’t want to be supporting your children when they’re 30, start teaching them about money when they’re 3, experts say.
“I think it’s possible to start pretty early,” says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board of Standards and a financial planner in the District of Columbia. “My 3-year-old granddaughter, my 6-year-old grandson – they know money.”
Money lessons for younger children can be simple, covering such issues as “if you spend all your birthday money today on candy, you won’t have any left tomorrow for a toy.”
“They need to say no,” says Alexander Joyce, president and CEO of ReJoyce Financial in Indianapolis. “It can be very difficult, but you’ve got to say no.”
Giving your child an allowance is a good first lesson in budgeting. The allowance should come with a discussion of what the child is responsible for covering and what the parents will pay for. For example, you might tell your 10-year-old that he is responsible for making church donations, buying his own toys and paying for after-school treats with friends.
Because children today see less physical cash, paying them in cash and using jars or envelopes to separate piles of money into spending, saving and giving compartments gives them a better sense of how money works. Older children could use a spreadsheet or an app to gain the same understanding.
“You want the child to be able to see the big picture,” Blayney says.
As the child gets older, and allowances are increased, parents and child should have periodic kitchen-table meetings to discuss how to budget the allowance to cover the kid’s expenses.
“Parents are so busy with their own lives, they don’t take the time to sit down and help the child with the issues of money,” says John Eikenberry, president of Eikenberry Retirement Planning in Sidney, Ohio. “It’s a tough topic to talk about. Sometimes parents aren’t that great with money, either.”
Here are nine ways to teach your children to budget.
Give the kids an allowance in cash. Use graphic methods such as envelopes or jars to divide money into posts for spending, saving and giving. Be clear about what the allowance is expected to cover. Another consideration is why allowance is given. Some experts believe allowances should be tied to chores, so the child understands that money is earned. Others believe the two should be separated, and the children should do chores as their contribution to the family.
Discuss budgets when the allowance is increased. If you pay your child once a month, for example, discuss with her how she will make that money last, perhaps dividing it into weekly amounts or spending categories, which may vary depending on the child’s age.
Give your child opportunities to earn more. Younger children can earn money by doing extra chores, and older children can help with a family business or work for neighbors and friends. “You want to teach lessons of responsibility and entrepreneurship,” Blayney says. “Make the allowance a little bit less than the kids’ weekly wants.”
Use budgeting apps or spreadsheets. Kids may not initially understand how to divide a week’s worth of money to cover expenses. Use envelopes, jars or apps to help them map out a budget. “Don’t expect them to do the mental math in their heads. They’ve got to see the totals, and they’ve got to see the parts,” Blayney says.
Encourage teenagers to get a job. Students with heavy academic loads or demanding sports schedules may not be able to work during the school year. Educated parents may not see any merit in sending their National Merit Scholar to work at a hamburger joint. But young people learn an incredible amount from those jobs. “There are a lot of life lessons learned in minimum-wage jobs,” Pelletier says. “You’re not doing your kids any favors by not having them get some work experience as soon as possible.”
Don’t bail kids out if they make bad decisions. If your daughter elects to spend her entire school year’s clothing budget on one pair of jeans, don’t bail her out by buying her a dress for the dance. “You have to have a little bit of tough love. They have to live within their means,” Eikenberry says.
Use shopping as a teachable moment. Take your kids with you when you buy groceries and talk to them about your choices. Show the difference in price between the brand name and the store brand, discuss sales and explain why you’re buying the ground beef instead of T-bone steak.
Give children control over some purchasing decisions. Force your child to budget. Give her a prom allowance rather than buying individual items. Set a party decorating allowance, and then let your daughter price the items. Set a sleepover budget, and let the child decide whether to order pizza or cook spaghetti. Give the child a holiday gift budget, and let him decide how much to spend on each family member. “The goal would be to get your kids to a point of when they’re 18, they’re financially stable,” Joyce says.
Help your children open bank accounts. Once your child reaches a certain age (often around 12) and has some money, take him or her to the bank. Get your teen a debit card when she’s ready, and then make her responsible for keeping track of its use. “I don’t think it’s good if parents bail kids out for overdraft fees,” Blayney says.
A version of this story appeared previously at U.S. News & World Report.