Parenting comes with plenty of challenges; teaching kids about money — including deciding the details of an allowance — is just one of them.

As more and more Americans have trouble managing their finances, it’s never too early to start teaching good money habits — even if it means just having a chat with your five-year-old stashing dimes in his piggy bank. In fact, an allowance is an especially important tool for teaching kids how to be smart with money.

With that in mind, here are seven tips about kids and money, from choosing your child’s allowance amount to helping them decide what to do with it.

1. Decide when to start. While many think of a child allowance as something spoiled kids have to go shopping with, it’s actually an important way for children of all ages to start managing and saving money. It will depend on your particular child, but many experts recommend starting a child allowance as early as the age of 4 or 5, even if it’s on a very small scale. Then, your kid will be used to the idea of “owning” a certain amount of cash, and more prepared to have conversations about it down the line.
2. Consider common formulas, but let your child pick the amount. Various sources have cut-and-dry equations to determine the “right” allowance amount, with two common ones being 50 cents or $1 per year of age. While such a formula may be a good starting point, I recommend letting your kid suggest the amount once old enough to have an intelligent conversation. Use the aforementioned formulas as a reference, consider your personal values and budget, and then come to an agreement. This will make children a more active part of the allowance process, prepares them to be comfortable negotiating about money, and helps them realize they likely will not get all the money they want at most stages of life.
3. Talk to your kid about saving, spending and more. You should often talk to your kids about money — whether in terms of family budgets, pro athlete salaries or day-to-day spending decisions. Start before the first payment is handed, but keep the conversation going. Also, explain upfront that the money will come in consistent intervals. Finally, make it clear the allowance is not  a reward for daily chores. If you link the two, your child will starting asking “How much money will I get?” every time you ask for a hand around the house.
4. Set specific goals. Along the same lines, its a good idea to come up with an allowance gameplan. One option is to divide your child’s allowance into suggested categories: casual spending, general savings, and money being saved for a particular purchase. If your child is saving up for a big-ticket item (a relative term, depending on the age and allowance amount), you may decide that the goal is to save up half the cost, and you will meet the other half.
5. Reward proper saving habits. Of course, not all savings will go towards spending. It’s also important — especially once your kid grows up and is on his or her own — to have some savings stashed just in case. When I was growing up, my parents opened a savings account for me at a young age, and encouraged me to put money earned or received in the account. The rule was simple: If I put any money in the savings account, they would match it. It worked like a charm. There are other ways to build similar saving habits with your children, but the bottom line remains the same: Make having a cushion of money as appealing as buying the latest new toy.
6. Don’t bail your child out. Of course, kids will be kids and that means they’ll sometimes overspend. Heck, adults do it all the time. One key rule for kids and money, though, it to let them learn their lessons the hard way. Throughout life, money will be limited and prioritizing wants and needs, pushing off purchases and saving even when its tough will be important skills. Let your child allowance serve as a training-wheel version of these life lessons.
7. Know when to stop. You must know when to start paying a child allowance, but you should also know when to stop. Even if you want to continue handing your kid a weekly budget through high school or college, make sure they get a summer or part-time job as early as they can so they realize income won’t always come from mom and dad — and that making extra is their own personal responsibility.

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