Show them the money: Can your teen handle a budget?

According to an article at Forbes, the average college graduate has four credit cards and $4,100 in credit card debt. This doesn't even take into consideration the thousands of dollars of student loan debt that most young adults face as they enter the workforce. However, with a basic financial education, your teen doesn't have to be a part of this sobering statistic. Here are six tips to help your teen learn to manage money:

Set an Example

How many times have you told your kids to "do as I say, not as I do"? The fact is, kids copy what they see more than what they hear, so the best way to teach them is to lead by example. Let them see you make your monthly budget, pay your bills and tell them why you decided against buying that $100 handbag that you really loved. Don't despair if your finances are in a mess; this is a prime learning opportunity for you and your child. Read a book or take a course in money management and learn together.

Let Them Earn Money

Allow teens to take on a part-time job such as babysitting or mowing grass to not only gain work experience, but earn some dough as well. If working isn't an option, have them find household tasks, above and beyond the chores you expect them to do, that they can do for money. CNN Money recommends giving an allowance, but teens tend to be more careful with the money that they earn.

Allow Them to Spend, Save and Give

Didn't you hate it when your parents told you that your birthday money was being put in your savings account "for college" at an age when you didn't even know what the SAT was? An article from Family Circle says that teens need to learn how to budget their money at an early age when making a mistake. "Hello, $75 blue jeans!" isn't nearly as big of a setback as maxing out a credit card with a $5,000 credit limit. Help them determine how much is appropriate to spend on their immediate wants, how much should be put aside for a long term goal like a car or college tuition, and how much they want to give to a charitable organization.

Set Up an Online Bank Account

Most teens are tech savvy and will enjoy being able to watch their savings grow in their bank account. This will also help them develop the habit of watching for fraudulent use of their account. LifeLock says that more than eight million people were the victims of identity theft in 2011. Early detection is key in getting the mess cleaned up before it's too late.

Show Them how much Debt Costs 

Chances are, you've got a mortgage, car payment or student loan lurking around. While none of those are "bad debt," they are still debt and you're paying hundreds of dollars in interest each year. Take out your statements and let your teen see just how much of your monthly payment goes to the principle and how much goes to interest.

Teach Them to Be Savvy Shoppers

Whether it's clothes or video games, it pays to shop around and wait for a bargain. Explain to teens that stores have sales quite regularly and many times coupons are available to further decrease the price. Teach them to compare prices at different stores and online, and to consider buying the item second-hand through eBay, at a garage sale or consignment shop.

It's never too early to start teaching teens about money. Use these tips to guide you, but give your child the freedom to make mistakes now when he's 14, so that he doesn't repeat them when he's 24 and responsible for rent and a car payment while earning an entry-level salary.

Jessica Horton is a former copywriter and community manager at MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.