Only a third of U.S. states require that children take a personal finance class before high school graduation, according to the Council for Economic Education. Because of this, parents are often solely responsible for teaching their children to be financially literate. 

You don’t want to wait until your child is leaving for college before you begin the conversation. Some research suggests that kids’ financial habits can be set by age seven, so you should talk to your kids about money sooner than you think. There are simple ways to teach children how to make good financial decisions at any age. 

Reiterate the Difference Between “Want” and “Need”

Growing up, children should know how to differentiate between something they need and something they want. This simple change in mindset can make it easier for them to budget as they get older. They’ll realize that even though they may want to buy a new outfit, they need to pay their rent and other bills first. 

Encourage Financial Goal Setting

Most adults can’t make a big luxurious purchase without first saving for it. Children can practice this on a smaller scale by practicing delayed gratification in relation to receiving some of the things they want. Aside from gifts for special occasions, it’s best to give kids some financial responsibility for the things they’d like to buy for themselves. This lesson can easily be taught with a piggy bank and allowance for doing chores. 

Teach Them About Building Credit

Credit is like a person’s permanent financial transcript, so it’s a lesson that shouldn’t be forgotten. It can be difficult for kids to understand such an abstract topic, but teenage children will be capable of grasping the concept. It’s important to reinforce the fact that credit itself isn’t a bad thing, but it must be used responsibly. There is always the risk of overspending, but starting to build credit at an early age can have advantages in the long run. 

Explain How Money Works in the Real World

Children tend to live their lives in a bubble of innocence, which can give them a skewed perception on finances. A thousand dollars might seem like a lot of money to a child, but adults know how quickly that money can come and go. When they’re old enough, let your kids see exactly how your family budget is laid out. 

Teaching kids financial literacy can’t just be a one-time lesson. It has to be a part of their everyday life. You should also remember to practice what you preach. Kids can learn financial habits by observation alone, so make sure you’re setting a good example.

If and when your children do make financial errors as they age, don’t rush to help them. Letting them feel the repercussions of poor financial planning can be the best way to encourage responsibility for their own financial health.