As high school and college students return to school this autumn, parents can help them earn an “A” in financial literacy. It’s a subject that’s critical for their future, and it can be taught from home, alongside their online classes.

It’s surprising how many children don’t understand the basics of finance, let alone the principles that drive long-term investing. But without hands-on experience in money management, college students can fall deeply into debt or fall victim to financial frauds.

Since financial literacy isn’t a required college course, it’s up to parents and other family members to help prepare students for the real world. 

A good starting point is to discuss the different types of financial accounts, including checking, savings and investments. For instance, many students don’t know that a debit card is linked to a checking account, and that purchases are subtracted immediately from the balance. That’s different from a credit card, which allows payments to be deferred, but if not repaid by the statement date, carries a high interest rate.

One suggestion is to open a checking account in your child’s name together with a debit card. Agree on which purchases will be his or her responsibility. You may also outline the expenses you will be paying this autumn, whether your student is learning from home or away at school.

Next, you should talk to your child about budgeting and prepare a spreadsheet, or table, showing monthly income and expenses. There are many financial applications available that a student can use to track daily spending, as well as incoming funds from parents, a college scholarship, or better still a part-time job.

Ironically, students from families with limited means often do a better job of budgeting than children from wealthy families. That’s because they understand the value of money and count every penny. In contrast, money is often taken for granted in affluent families, as a result, many children don’t get the practical experience of managing their own money, making it more difficult for them to achieve financial independence later in life.

For many high school / college students, learning how to create a budget, control their spending and avoid credit card debt will become the most important lesson from a “Finance 101” perspective. Once they have mastered the basics, you should continue their education by focusing on money management. Have them open a savings account and teach them the benefit of a rainy-day fund for unexpected expenses.

After instilling the importance of checking and savings accounts, parents should take the time to start explaining investing. Sit down and explain the difference between stocks, bonds, money market funds, real estate and other types of assets. Remember that this is a new language for them and there isn’t just one term to describe an asset class. For example fixed income is synonymous with bonds or shares with equities.

A step-by-step approach to financial literacy can help a college or high school student develop their knowledge and skills, enabling them to have the tools to make good decisions about money. Most importantly this will remove the stress of the unknown or of making mistakes. These are lessons with lifelong benefits for your children