Start the conversation early.
Having children contribute financially to their own education is a financial education in itself. If you keep an open dialogue about money throughout your children's lives, facing the real world after graduation won't feel like such a huge adjustment.
Involve them in decisions.
This type of activity can be as simple as taking them along to the grocery store. Explain the amount you have to spend for that week, and how you budget for nutritional staples versus special treats.
Set an allowance.
The amount can increase as they grow and take on more responsibility. You can also encourage your children to divide what they earn into three categories: spend, save and give. Use jars or decorated envelopes to split the money and then count it with your children every month to see how the balances are adding up. Make deposits together into savings accounts and 529 education savings plans and read the monthly statements together. This basic budgeting exercise can instill strong financial habits that carry over into adulthood.
Show them how to budget.
Explain how you create the family’s monthly budget. Your children can put this practice into action by learning to manage the cash they have available. They can learn how to make their allowance last, or how to put a portion of any gift money they receive into their 529 savings plan accounts.
Share what you’ve learned.
Describe the lessons you’ve learned from your own life experience. Perhaps it was setting aside money for something special you really wanted. Or steering clear of impulse buys in favor of saving toward more meaningful goals.
Live within your means.
Explain the difference between paying cash or borrowing to buy something. In particular, talk about how using credit cards actually makes something more expensive unless you pay it off right away. In other words, your children should know not to spend what they don't have.
Set goals as they grow.
Discuss what it means to have a significant financial goal and work toward it over time. Does your child have his eye on a new bike? Talk about how much he'll need to save, and how he can put allowance or gift money toward that goal. You can explain that you're setting aside money for their college education in a 529 savings plan. Let your children know that starting early and starting small can go a long way toward reaching a financial goal.