By the time your children are teenagers, they probably understand the basic concepts of personal finance and have savings and checking accounts established in their names. (If not, it’s never too late to teach them these lessons. Our previous posts, such as “How to Teach Tweens Money Management,” are great resources to start with.)

One of the best ways to motivate high school students to engage in financial education is to give them an incentive. And what does every coming-of-age student want? The freedom to drive!

Before you hand over the keys, however, it’s important that teens are responsible and informed consumers. Here are a few tips to help parents teach their high school students money-management skills.

Put them on a monthly budget

Finding out if your child is responsible enough to drive often depends on their ability to manage monthly “allowances.” After training them to save up for something they want by putting money aside in their checking account or savings account, help them create a workable budget using Mint.com or another financial management service.

Teach them the art of thrift

Here’s where teaching your high schooler about shopping with coupons, buying non-name brand products and comparison shopping becomes important.

Talk about college financing

Assuming you’ve started saving for college, now is the time to start filling up your child’s head with ideas of their future path. Whether or not they go to college, the earlier you start them on investing in mutual funds and other vehicles that build wealth, the more money they will have when they need it.

Warn them about identity theft

With social media being a huge part of teen life, it’s increasingly important to teach your high schooler about online security.

And when the urge to drive hits, it’s time to discuss how teens can get their first car. For most families, there are three options:

  1. Buy them a car
  2. Let them pay for the car on their own
  3. Agree on a combination of 1 and 2

As a teen, it’s more difficult to buy a car, since they don’t have an established credit history and will have difficulty finding a financial institution to lend them the money.

Whether it’s the parents or the teens that put down the initial deposit, it’s important to discuss how the purchase of the car is only the beginning of your automotive expenses.

Working with your teen to establish a reasonable auto budget is critical. The money you have available for a down payment and the potential for making monthly installments on a loan, gas, and any needed repairs will determine your car choices.

And should your teen go for a new car or buy a preowned model? There are pros and cons to both options. Consumer Reports points out that new vehicles are presumed to be consistent performers but the best way to save is to buy used. Although, remember to build the cost of initial maintenance into your budget (tires, brakes) to get your teen off to a safe start.

Whether you select a new or used vehicle, a sporty coupe with plenty of power, or an energy-efficient hybrid, one thing is certain: helping teens navigate one of their first big consumer purchases in life is a powerful way to reinforce and instill important and lasting financial literacy lessons.