As adults many of us are all too familiar with the idea of budgeting. Some of us learned how to budget by making financial decisions that had either positive or negative impacts. Here are five easy steps to help your teen grow into an independent, financially well-informed adult.

Talk about money
Some parents choose to shield their kids from financial decisions. But the reality is that kids can learn about the importance of money from real life situations. Growing up I would often hear “money doesn’t grow on trees”. And while it caused moments of frustration because I really wanted new roller blades or the latest video game, it helped me understand that things just don’t appear. This is a good opportunity to teach kids the value of the dollar and have conversations about needs versus wants.

Create a budget
Whether your teen is working part-time or receives an allowance, helping them create a budget allows them to learn about spending and saving. It’s a good idea to help them create a monthly budget, especially before they head off to college. This practice can help with future planning, and it is easier to start when they are in a place with little risk involved.

Set financial goals
Once their budget is created, you can help your teen set financial goals. For example, if they are hoping to buy a new laptop, it may be beneficial for them to start setting aside a savings. They could opt to put aside a certain percentage of each paycheck, or use monetary gifts they receive from birthdays, holidays or graduation parties to come up with a down payment on bigger ticket items.

Know the opportunity cost
When teens start receiving a regular paycheck, they might be quick to spend it on luxury items such as their wardrobe. However, it is important to point out what else that money can go towards. You can ask them reflective questions like “Would you rather spend that $100 on a pair of shoes or put it towards a new smartwatch?” Having them think about these choices, though they may seem minor, will have an impact on how they choose to spend their money in the future. Opportunity cost can also translate to time.

For example, if they are in college and choose to spend time and money going to see a movie with friends instead of going to class, not only are they losing out on valuable class time, but they are spending money on the movie in addition to wasting money on the class they just skipped.

Understanding cash versus credit
Sometimes it seems like credit cards rule the world. Just one simple swipe and you can have any product at your fingertips. While balancing a checkbook might seem outdated, teens should still have an awareness of money sitting in their bank account that has already been spent on credit card purchases. This is also a great opportunity to teach them about interest and the impact of minimum payments.