Two girls laughing with laptopMiddle-school children are more likely to begin earning money outside of the house, and their increasing “wealth” and independence can open the door to costly impulse purchases. What advice can parents and guardians pass along to them?

Work more, earn more: Create opportunities for your child to earn more money by performing additional chores around the house or working a summer job. You also can help your budding entrepreneur start a small business in the neighborhood, such as dog sitting for neighbors. Depending on your state’s labor laws, your child may be able to explore other opportunities, such as working part-time year-round at a grocery store, once he or she turns 14.

Save for long-term goals: Start by discussing the costs of college and other larger expenses. Then you can explain the benefits of saving in a federally insured account and investing for your most important future needs and wants instead of borrowing money and paying interest. Together, you can visit your bank or review product offers online and find a good savings account (if they don’t already have one). This also is a good time to introduce the topic of how, over time, investments in stocks, bonds or mutual funds can grow money more quickly than deposits in savings accounts. But also point out that investments such as these involve the risk of losing some or all of the money.

Learn about credit cards and borrowing costs: Help your child understand the pros and cons of making purchases with a credit card. Consider reviewing a card offer and discussing some of the commitments you’d make if you were to sign up. Be sure to point out how you would owe interest if you made a purchase with the credit card and didn’t pay off the balance in full. And, explain the consequences of not making credit card payments on time. You might introduce your child to the concept of personal credit scores and how a low credit score can mean you’ll pay more in interest costs than someone with a higher score. For tips for young adults on building a good credit record, see our Fall 2012 issue.

Protect yourself from financial crimes: Young people need to know that they are vulnerable to identity theft, fraud and other risks. See the resources in the box on the right for tips on how to teach them to protect themselves online and when they use social media, particularly for shopping and banking.

Article courtesy of FDIC.