For many parents, talking about money with their teenagers begins and ends with "How much do you need?" Of course, the financial facts of life are more complicated and, like that other Big Talk, the sooner you and your kids have it, the better.
"This is a critical life skill," says Carrie Schwab Pomerantz, strategist of consumer education at Charles Schwab & Co. Inc. "Kids want to learn, and they would like to learn from their parents and have them as role models."
Most parents want their children to know what it means to earn, save, spend and share money. But starting that conversation can be awkward. Schools don't offer much in the way of financial planning, while many adults face emotional obstacles where money equates to love, or control or self-image.
Maybe families aren't managing their own finances, or it could be that the subject of money is simply taboo.
"We live in such an affluent society today that it's even more important to teach kids responsibility for themselves and for others," says Pomerantz, who notes that having brokerage founder Charles Schwab as a father didn't give her any advantage about finances.
"My father wasn't necessarily one to have money conversations," she says. "I did not get an allowance. I've had jobs since I was 13 years old."
Ideally, discussing how people use and abuse money starts early and continues well after boxes are packed for college. If that hasn't happened yet in your family, the teen years are especially crucial: Kids of that age are keen to have cash and will find many innovative uses for it. For everything else, there's the credit card.
So it's a good time for kids to learn about budgeting and bill-paying, saving and spending.
What teens don't know about money was evident in a recent Schwab survey. Only 45 percent of respondents knew how to use credit cards, while just 26 percent understood credit-card interest and fees. About 40 percent said they could budget themselves, but only one in three could read a bank statement, balance a checkbook and pay bills. And barely one in five had any inkling about how to invest.
Ross Levin, a financial adviser in Edina, Minn., teaches his teenage daughters about budgeting by giving them a set amount of money each month for clothes, entertainment and other personal expenses. If the girls are with their parents and want to buy something but don't have the money, Levin says there's no prearranged deal allowing them to pay it back.
"They have their money, they bring their money, they spend their money," Levin says, adding that the strict policy has been a lesson for the entire family.
"It's a very different feeling when you're making the decision and doling out the dollars," he says. "We found them making choices they didn't make when we were the ATM."
Budgeting is all about choices and limits. Credit cards break through the budget wall. "Charge it" is liberating, gratifying, and easy to say and do. But credit-card debt can also break a bank account. That plastic card is real money, and monthly interest and related charges add up quickly.
"Credit-card debt is insidious," says Pomerantz. "Thirty-five percent of bankruptcies are from young people 35 and under. We need to teach our kids to pay cash as much as possible and to use credit cards for emergencies. Do not put more on your credit card than you can pay off that month."
So although it seemingly violates parenting's cardinal rule about kids not playing with matches, some financial experts advocate giving teens a credit card.
Says Pomerantz: "They need to know how to use a credit card, how interest accumulates, how fees are charged. They need to understand how to manage their credit."
Think of a credit card as a driver's license, and money as the family car. In novice hands both cars and credit cards can be dangerous. But a responsible young person who can practice and build skills under parental supervision is better prepared for the road.
Balancing a checkbook every month isn't high on most people's list of fun things to do. Yet squaring a bank statement with your own records is a basic tenet of financial management — and if your kids are looking over your shoulder, they might even catch a misplaced decimal point or two.
"I see mistakes all the time on bank statements," says Barbara Steinmetz, a financial adviser in Burlingame, Calif. "Take control of it. The checkbook is something you balance, and a credit-card bill is something you read, to make sure the charges are all yours."
Some experts even advocate involving the kids in running household expenses. A high school senior, perhaps, could be entrusted with keeping the books. They'd know how much the family makes and what is spent on property taxes, mortgage, insurance, and in this way would develop an appreciation for expenses that can be controlled.
At the least, kids and parents can review the family bills, says Nathan Dungan, president and founder of Share-Save-Spend, a program to help families build healthy financial habits.
Show kids monthly credit-card and telephone charges; study the checkbook and bank statement, he advises.
"Nothing takes the place of a life lesson like those real world experiences," Dungan notes. "Once you walk them through, it will yield other questions."
"I love taking kids to banks," he adds. "Let them have a conversation with a financial personal other than you. It's a great stress reliever and teaches them how to engage with a financial professional."
Maybe it's sounds glib to say that a family that pays together, saves together. But if you want kids to put a voluntary cap on spending, they also need to understand the perks of delaying gratification.
Teach by example, Dungan suggests. Tell kids, he says, about 401(k) and IRA accounts and how you use these vehicles to save for a comfortable retirement, and how a 529 college savings plan is building funds for their education.
"It's amazing how often parents overlook having that basic conversation about bill paying, saving and investing for the future." Dungan says. "Use that as a springboard to build up their financial knowledge and vocabulary."
Creativity helps. To encourage his daughters to save, Levin, the Minnesota financial adviser, offers a sweetener to their monthly allowance: He will double whatever they've put in the bank over a year.
"We want the kids to understand that it's their money and they need to make choices," Levin says.
Charitable giving is a personal choice, but ultimately it's a spending decision. Accordingly, it's also a family matter.
If you give away 10 percent of your income, for instance, encourage your children to do the same with their money. Let them choose their favorite organizations or have them agree to support the family's charities, says Kacy Gott, a San Francisco financial adviser.
Philanthropy is a key to the process of talking with kids about money and teaching them about its power and limits, Dungan adds.
"The predominant message that a young person hears in the culture is 'see money, spend money,'" he says. "Philanthropy is taught and nurtured. When you nurture that spirit of generosity, of having to look outside of themselves, particularly when it comes to money, they tend to appreciate what they have that much more."
Jonathan Burton is MarketWatch's investments editor, based in San Francisco.