When kids watch the ATM spit out cash at the touch of a button or see credit cards being swiped left and right at the store, it can be hard for them to understand that money doesn’t grow on trees.

Teaching kids how to save and spend wisely is an important responsibility for parents, and Dr. Pilar Bradshaw encourages moms and dads to start introducing those lessons when children are young.

“Money management may seem like a weird thing for a pediatrician to be talking about, but it’s part of what I call ‘getting your kid ready for life.’ That’s the job of being a parent,” she says.

Start the discussion early
Children as young as 3 years old can grasp financial concepts like saving and spending. A 2013 report by researchers at the University of Cambridge found that kids’ money habits are formed as early as age 7.

One of the best ways to teach kids to manage money is to give them opportunities to earn some, whether that be for doing their chores, or doing special jobs beyond their regular expected tasks.

“Earning money helps them understand the full value of ‘Oh, I have to do something in order to get something,’ that not everything is free,” says Jillian Daggett with SELCO Community Credit Union.

How to start
An effective way to teach younger kids about financial responsibility is with the three-jar method.

“Have one jar for savings, another jar for spending and a third jar for giving, because you want to teach your children, as young as you can, that giving is also important,” Jillian advises.

Once you set the expectations for your child’s allowance—step back. Let them experience the freedom of spending, as well as the letdown of wasting money. In addition:

  • Lead by example and show your kids how you manage money. Involve them in the household budget, show them how you write checks or pay bills online, plan the grocery list and use coupons.
  • Utilize the internet to teach comparative shopping skills.
  • Set your child up with a simple savings account when you feel he or she is ready to take their money management skills to the next level. When they reach their teen years, upgrade them to a checking account with a debit card.

“Having a debit card attached to a checking account is a great way to start building responsible behavior without the pitfalls that often come with using a credit card,” Jillian says. “With a debit card, you can’t spend what you don’t have.”

Educate teens about credit
As soon as your kids turns 18, they’ll get inundated with credit card offers, especially once they’re in college, so building, maintaining and protecting their credit is another important conversation to have with your teens.

Parents with kids going away to college may want to add their student to their card to cover books or emergency expenses. A shared card account also can help parents keep tabs on their kids’ spending and payment habits. Whatever you decide, make sure your teen knows that credit cards are loans and that there is a cost to not paying off balances right away.

“Developing good saving and spending habits are critical as kids get older,” Jillian says. “If they learn when they’re young, they will have the skill set to manage their money when they’re out on their own.”

Be patient, but be consistent
Teaching children about money at any stage takes time and it’s not always easy. But if you want your children to know how to successfully manage their money when they get older, taking the time now will be worth it.

“You’re not there just to love them and to coddle them,” says Dr. Bradshaw. “You’re there to help get them get ready to be adults. And money management is a big part of that.”