Start teaching your kids how to budget their money as soon as they bring home their first paycheck. With no value judgments, sit down with your children and ask them what they plan to do with their money. Once you know their goals, whether it's buying a car or an iPod, you can talk about what they need to do to get there.
"Priorities are good because you teach the concept of finiteness," Howard says. "There's only so much money."
Before they go away to school, have them set up a budget for expenses. It will increase their awareness about money flows, ingoing and outgoing. After graduation, show your children how to make a household budget. Using the starting salary of their chosen profession as a guide, have them calculate their after-tax income and then figure out how much they can actually afford to pay for the basics, such as rent, food, utilities, insurance and transportation, as well as vacations and entertainment.
3. Finance college
Don't forget to factor student loan payments into the monthly budget. Of the college students surveyed, two-thirds carry some student loan debt, with 70 percent of those students shouldering $10,000 or more.
To keep your teens from getting in too deep, work the numbers together. Tell them how much you will kick in toward their college expenses and help them figure out a plan for covering the rest. If their answer is "student loans," Bankrate's calculator shows the true cost of a loan, which may help your children understand this is not easy money. FinAid offers a more extensive set of calculators for student loans with varying terms.
Seeing that they'll be on the hook for $575 a month for 10 years if they take out $50,000 in loans may give your children the incentive to look for ways to cut costs. They might consider commuting or attending a state school.
4. Establish credit
College loans make up only part of the debt load that students carry after graduation. Because two-thirds of college students surveyed have one or more credit cards and 83 percent got their first one by the end of their freshman year, it's easy to graduate owing thousands more.
"They hand them out like candy on college campuses," Howard says. "I look at it as part of the freshman year survival kit: Don't flunk out, don't get arrested and don't take on debt."
Although Howard advises against freshmen or sophomores having credit cards, he does encourage college students to apply for two during their junior or senior years. "It's the only time in your life that someone will give you credit with no proof of income and no credit history," Howard says.