1) Show them your finances, set a good example
Part of raising a responsible child is helping them understand the value of money. Be honest with your child about your salary, monthly expenses, and budget.
As you include your child in these discussions, they will gradually understand money. Help them understand the cost of rent, mortgage payments, and utilities (such as electricity, water, and other utilities).
When you avoid concepts of money around your children, it is easy for them to grow without understanding the real cost of the lifestyle they are used to.
2) Reward hard work with cash, but give them reasons to save
It is equally important to ensure that your child understands that in the real world, money has to be earned. Introduce chore money because, in the real world, you do not get allowances.
Try to make sure the chore money gives your child enough funds to buy necessities (like school lunch) and some extra funds.
The extra funds should not be enough for your child to purchase ideal items (toys, games, fancy shoes) at once. If your child really desires a product, they will learn to save X amount of money over a couple of weeks.
3) Guide them through the basics of budgeting, but let them create their own budget
To ensure your teen is not susceptible to 'impulse buys', help them understand short-term gratification vs. actual value and meaningful experiences.
Money should be spent on things that add true value to your life: a functional product (shoe, pen, sweatshirt) and memories that help you develop as a person (going out with friends, visiting a museum, etc).
Next, show them your own budget. How much of your income goes towards necessities? To luxuries? To savings?
Help them understand that setting hard limits for how much you spend and where can drastically change your financial situation in the long run.
Do not make the budget for your child. Only by 'doing' can your child truly pick up these essential skills. They might put too much money towards games, forget about the budget and make other mistakes early on, but that's okay!
4) Open a savings and checking account for your child
Back to our note on transparency, give your child the ability to monitor their college savings account (529, etc). You can also open up a custodial bank account for them so they have some extra cash for the future!
Even though a debit card may seem scary, the goal is to gradually introduce real-world money habits to your child. As people begin to use cash less, your child needs to learn how to use a debit card.
Services like Apple Pay make transactions effortless, only increasing the likelihood of poor spending habits.
Teach your child to resist this early on by ensuring they recognize the value of a dollar - even if it's digital.
5) Familiarize your child with investing to encourage research-based purchasing
Making smart purchases is a skill that can be learned. In fact, it's a skill that many people don't know they have.
Many of these bad spending decisions are driven by the desire for instant gratification. Will your life really be improved with those new designer shoes? Teaching your teen to make explicit buying decisions through analyzing the true value of products before spending will save your teen thousands of dollars down the line.
One of the best ways to encourage analytical purchases is through safe investing. Teach your teen to weigh the risks even when glorious profits can be tempting. Apps like Bloom, let parents monitor their teen's investing behavior and approve/deny trades. The app also has many lessons on research, safe investing, and personal finance lessons.