The ancient Chinese philosopher Lao Tse said, “Give a man a fish and you feed him for a day. Teach him how to fish and you feed him for a lifetime.”

The same principle applies to teens and credit cards. Teach them how to use credit responsibly and chances are they’ll enjoy a lifetime of wise money management free from nagging consumer debt. Of course, teaching kids how to handle credit cards is easier said than done. Here are some proven tips you can adopt as is, or adapt to your particular needs and circumstances.

Start With Cash

Teach them first how to manage the cash they already have. As early as middle school age, kids can grasp budgeting and the concept of either spending all their allowance or cash for school clothes right away, or saving some of it to buy something later.

Understanding spending limits is a key step in learning how to control credit spending. But remember to emphasize that once their money is spent, it’s gone. Resist the temptation to slip them extra cash if they discover they missed out on some “must-have” purchase. “Missing out”—or said a better way— “going without” is a learned behavior critical to managing future finances successfully.

Get them Checking a Account

Once your kids have a good handle on money responsibility help them “graduate” to a checking account. By the time your kids are in high school, they should have access to a checking account so they learn how to write checks and manage a debit card, reconcile a bank statement, and avoid overdrafts and bank fees. Their first debit card should be considered “plastic training wheels.” A debit card allows them to make purchases and withdraw funds from an ATM, but it can also be used like a credit card.

The good thing is that the charge is deducted directly from the account’s balance, so there’s no lingering credit balance that accrues exorbitant interest. So kids get the experience of using plastic while avoiding the potential pitfalls.

Make sure when you set up the account that you place a hold on overdrafting so that if the card is used with insufficient funds in the account that you can avoid an overdraft fee and the teen will learn to watch his available funds and budget properly.

Invest in a Youth Financial Training Course

While some secondary schools offer financial management classes to teenagers, not all schools have these programs. By high school your teen should be ready to learn about and understand things like compound interest, budgeting, saving, and basic investing. It may seem too early to start talking about retirement funds when the kid has barely entered the work-force, but the sooner your child begins saving in an IRA or 401K the more that interest-over-time will benefit them when they are ready to retire.

Sites like Youth Financial (youthfinancial.com), The Youth Financial Literacy Foundation (yflfoundation.org), the FDIC Money Smart for Young People  (www.fdic.gov/consumers/consumer/moneysmart/young.html), and courses by Dave Ramsey (daveramsey.com/school/) and others offer great training programs, worksheets, and even video games to help teach kids and teens how to understand and be responsible with money—especially in regard to student loans they may need soon.

Make the Jump to Credit

Once the teen is ready to graduate or start college it is a good time to look into low-limit or pre-paid credit cards. Many companies offer student cards to teens over 18 so that you don’t have to co-sign with them and they can work on building their own credit.

Keep in mind that a pre-paid credit card like a Visa Secured card lets you set spending limits and track where your kids are spending money, both through monthly statements and through Internet accounts that show daily transactions.

What’s more, you can transfer money from your own checking account to the card as needed for a minimal transaction fee, and the card can be used like any other credit card to make purchases and build your credit history.

Set a Good Example

Remember that kids learn best by example. Having a good understanding of your own finances and control over your spending habits will influence your teens as they make the jump to becoming financially independent.