When should you start teaching your teenager about handling money? The earlier the better, says Toronto-based mortgage advisor Kathryn Kotris.

The financial habits they learn at this stage in life can very well stay with them for years to come -- unfortunately, the bad ones as well as the good ones. But instilling good financial sense into your teenager will give them a good foundation for their future. 



Teenagers and money
Here's a rundown of some time-honoured ways to introduce your teenager to the value of a dollar, and hopefully start her off right.

1. The benefits of a teen-friendly bank account
Many banks have special accounts for the under-18 set, with reduced or no service charges. Alternatively, your teenager might want to open a high-interest savings account; the money is harder to withdraw, but will grow faster. Some Internet banks, like ING, offer ATM privileges and even bricks-and-mortar branches.

2. How to shoulder financial responsibility
If your teenager has a part-time job or babysits, encourage him to pay for his own expenses, like iTunes downloads, movies, or the food court at the mall. Depending on how high his income is, he might be able to pay (in full or part) for clothing or gas for his use of the family car.

3. A roof over your head costs money
The parents of a friend of mine began charging her a nominal rent as soon as she got her first part-time job, and over the years, the rent increased in line with her income. When she moved out, they handed her a cheque for several thousand dollars. It turned out they had been quietly investing the entire amount on her behalf all that time. For a young woman just getting her first apartment, it was a welcome windfall, and she learned an important lesson not only about budgeting for regular expenses like rent, but about the long-term rewards of saving even small amounts.
4. How to handle and budget an allowance
If your teenager doesn't have a job, a weekly allowance is an excellent way to learn how to handle and budget money. The amount depends on age and family income, but somewhere in the $20-$30 per week range is popular.

Another option is to pay your teen for household chores (big ones, that is, not everyday tasks like dishwashing or taking out the garbage!) or babysitting younger siblings.

5. The perils of credit cards
Many credit card companies are happy to offer teenagers their first credit card, either with a small credit limit or "prepaid" through an advance payment. Kotris hates these cards, and says you should avoid giving one to your teen for as long as possible.

"They're like the 'gateway drug' of credit cards," she laughs. All they do is reinforce the idea of "buy now, pay later" -- and for many teenagers, whose impulse control may not be fully developed, they can be the first step to a lifetime of credit problems. Better, if they must have a card at all, to use a debit card, where at least they know they are spending "real" money, with a balance that falls quickly when they buy things.

6. The importance of setting financial goals
Encouraging your teenager to have a specific goal in mind-- whether it's backpacking through Europe, her first car, or helping to pay for university -- is a great way to get teens to learn the value of regularly setting money aside for savings. They don't need to save everything they earn -- in fact, keeping a little back for pocket money is often a good hedge against the temptation to "borrow" from the savings account.

7. RRSPS? Yes, even for teenagers
It's never too early to make your teen aware of the value of contributing to an RRSP account. RRSPs can provide immediate tax savings, and the sooner they start contributing, the longer the RRSP will be compounding interest for them.

Tax-free savings accounts are another good option for teens, especially if they are earning too little to pay income taxes, since over the years the interest on the account can continue to accrue tax-free, and the money is accessible should they need it later.