For many teenagers, living on their own at college is a major reality check. While 71% of teens feel confident in their money-managing skills, many lack practical experience. Teach your child how to make sound financial decisions without your help. Here are three important lessons in money management for teens.

Lesson #1: Creating a Budget

Help teens understand where their money is going with a basic budget.

● Track spending. Before deciding how to allocate expenses, teens should track where their money goes for a few weeks. Include items they might not pay for now but will in the future, such as clothing, entertainment or extracurricular activities.

● Do the math. Help your teen come up with an income total for each month, including allowance, gifts or after-school jobs. Then budget necessary expenses first. If there’s a shortfall, discuss ways to cut discretionary spending or increase income.

Lesson #2: Saving Money

Make setting aside income second nature.

● Be consistent. Teens should strive to put the same percentage of their income each month toward savings goals. This will help make savings a habit.

● Watch it grow. Once your teen is saving consistently each month, open a savings account and explain how compound interest can increase savings.

Lesson #3: Building Credit

Teach your teen the benefits—and risks—of credit.

● Use responsibly. By carrying a balance from month to month, your teen could pay hundreds of dollars in compound interest charges. Discourage teens from charging purchases they can’t really afford.

● Scores matter. Explain how to build a good credit history by avoiding late payments and keeping card balances low. Good credit will help your teen years down the road when securing a car or home loan.

Preston Carpenter is a State Farm Insurance Agent in Collierville; 901.753.1644