If you lived in a home with limited financial means, you probably heard the phrase "money doesn't grow on trees" once or twice. With children of your own, you've likely used this common expression yourself. Unfortunately, money habits tend to pass from generation to generation as children learn how to manage finances by watching their parents.

However, many parents don't feel prepared to set an example for their kids. In fact, one study revealed that only 34% taught their teens how to balance a checkbook, while a mere 20% have involved their teens in the family's budgeting and spending decisions. Furthermore, only 29% have taken the time to explain how credit card fees and interest work.

Although you should ideally start teaching financial literacy from an early age, it's not impossible to set your kids up for financial success even if they're only a few short years away from adulthood. The following tips will help you pass on some fundamental financial skills often applied in everyday life.

Tip #1: Help them get a job or start a side hustle.
Cementing the connection between hard work and money earned is crucial. While it's fine to give your kid an allowance for helping with chores around the house when they're younger, consider helping your teen find suitable part-time employment with someone else on weekends and during school breaks. This not only helps instill a great work ethic and strengthens their social skills, but it'll also give them a sense of independence, responsibility, and respect for money outside of the home. There's no mowing the lawn later or washing dishes after they've watched their favorite show or won their current video game.

If your teen happens to be a self-starter, foster that entrepreneurial spirit by showing them how to open their own business--both online and offline. These days, it couldn't be easier to launch a side hustle and turn a profit with little to no investment. 

Tip #2: Show them how to set and maintain a budget. 
According to a survey conducted in the U.S., approximately 18% of 15-year-olds don't know how to perform basic financial functions, such as setting a budget, understanding an invoice, and comparison shopping. Only 49% of parents say they've taught their teens the basics of budgeting, with another research report revealing that 15% of teens between the ages of 15 and 17 have no money management help at all.

Besides giving your teen insight into family budgeting, help them set up a simple budget so they understand how much they have to spend based on their earnings and how much they should set aside for long-term goals. Many financial experts suggest following the 50/30/20 rule. This involves allocating half of all income earned to essentials, 30% to personal spending, and the remaining amount towards savings. This easy-to-follow budgeting guideline is great for imparting key financial concepts like cash flow management, compound interest, thoughtful savings, and delayed gratification. Tracking their income and expenses will also embolden them to make better financial choices that will ultimately impact their goals and dreams for their future.

The good news is that there are plenty of online budgeting tools and apps that make this process incredibly easy. Andover Bank provides some cash management guides and tools online. Many of these tools essentially leverage the gamification of real-world tasks to keep budgeting fun and interesting. Your teen will be able to see where their dollars are coming from each month, where they're going, and their overall progress towards achieving goals. Although it's vital to let your teen be in charge of their budgeting, check in every few weeks to ensure they're staying on track.

Tip #3: Set them up with a bank account.
There comes a time when your child outgrows the piggy bank phase of life and needs a real bank account. A simple checking account on which you are a joint account holder is the perfect start as it creates a sweet balance between independence and parental supervision. In addition, it minimizes the need to carry cash and allows you to teach your teen about the ins and outs of debit card usage, general bank fees, overdraft fees, how to avoid surcharges, and how to reconcile their account, how to use an ATM, and more. View savings account options at Andover Bank to get started.

Tip #4: Encourage them to save and become investment savvy.
Fostering a savings mindset in your teen is critical to their success. With money often tending to burn a hole in their designer pockets, saving a small portion of their income each month helps kids learn to live within their means, avoid debt in adulthood, and become goal-oriented with their finances. When they know the bank of mom and dad is closed but that they have a nice cushion of cash of their own to fall back on, they'll be less likely to ask for a bailout.

Besides teaching your teen to plan for future purchases, make sure they're putting money aside in an emergency fund for unforeseen circumstances. You'll also want to explain the beauty of compound interest and start them on the road to investing. The earlier they begin, the better prepared they'll be for the future. Learn more, or connect with a professional about investing for young adults at Andover Bank.

As a side note, research shows that 69% of parents feel more prepared to talk to their children about the birds and the bees than investing, so rope in a professional financial planner if necessary--you could probably do with some advice, too.

Tip #5: Explain taxes and show them how to file.
Uncle Sam is undoubtedly everyone's least favorite uncle: he never fails to show up for his portion of your paycheck. However, tax laws and filing tax returns aren't part of most standard education curriculums. As a result, many first-time taxpayers feel wholly unprepared for the shock of tax and insurance deductions. This is why it's crucial to have an open dialogue with your teen about the responsibility of paying income tax and other relevant contributions.

As part of your discussion, make sure they understand the difference between gross and net pay, explain what deductions to expect, and teach them about potential penalties for things like failure to file, filing late, underestimating the amount payable, and paying late. You'll also want to walk them through the process of filing their first tax return so that they feel confident in what they're doing.

Tip #6: Set up a college savings account.
If your teen is college-bound, you need to discuss how you'll fund it. Student loan debt is astronomical in the U.S., with the typical borrower taking an average of 20 years to pay off their loan. That's not something you want to saddle your kid with, so there's no time like the present for your teen to start saving for college and applying for scholarships. Help your teen begin planning for college with our online guide.

One of the biggest reasons you should make your child contribute to their college fund is so that they feel like they have skin in the game. That way, they'll be less likely to mess around and treat college like it's non-stop party time. Make sure their monthly budget allocates a portion of income to college savings and set up an interest-bearing account to help the amount grow.

Tip #7: Teach them credit smarts.
Many people will tell you credit cards and loans are a necessary evil because you need to build a credit history, but that's simply not true. The reality is that with the right work ethic, good money management skills, and a savings mindset, it's possible to pay your expenses–even the big ones–and remain debt-free.

However, you also want to make sure you equip your teen to manage a line of credit wisely if the situation arises. Believe it or not, survey results found that 29% of parents don't teach their children credit card management skills, while 24% of teen respondents didn't know the difference between a debit card and a credit card.

Ensure your kid has credit smarts by teaching them the basics of paying amounts owed each month, avoiding interest, and negotiating lower interest rates when possible. Make sure they also understand due dates, penalties for late payments, and how to pay.

Tip #8: Plant seeds to get them thinking about retirement. 
Your teen is young, so retirement isn't likely top-of-mind, but only 14% of parents teach their teenagers about retirement savings like 401(k) plans and Roth IRAs. Here's the thing: helping your teen win with money means setting them up for the best financial future possible. Retirement is one of the biggest expenses they have to plan for, so giving them a jump-start will ensure their success later in life. Plus, with the power of compound earnings, they could potentially retire as millionaires long before their peers. Get started on your teen’s retirement plan at Andover Bank.

A Final Word of Advice 
Since a family's financial behavior heavily influences the money management habits of the younger generations within it, it's important to consider your relationship with money and how it impacts your children. Re-evaluate whether you're setting the right example and make adjustments if not.

Whatever you do, always steer clear of turning money lessons into lectures, so that your teen listens to what you're saying. Ultimately, you want them to walk away with sufficient financial knowledge and capability to make the right personal finance choices for a rich future (figuratively and literally).