When your child hits the tender age of thirteen or so, they may not have big dreams yet, but sit down with them anyway and discuss car ownership. A car is one of the biggest incentives you can give a teenager to save for. It equals freedom in their eyes and they are willing to work hard for it. Let them know that though they may not be thinking about it now, in about three years, they are going to want to buy a car and you want to help them figure out a plan to get one. Then follow the steps outlined below:

Step #1: Put together a three to four year savings plan. Help them set their financial goal of how much they will have to save to buy a car with cash. Do not give them financing as an option. This undermines the lesson you are trying to teach them about personal finance and saving. No financing! Go through car magazines or online to get them excited, but also to give them a real life idea of how much they'll have to save. After they have an idea of how much they'll actually have to save, figure out the monthly or bi-weekly breakdown of how much they'll have to put away to achieve their financial goal by their sixteenth birthday (or whatever date they choose to make their first car purchase). Get the plan together then move on it.

Step #2: Figure out what your teen is going to do to actually earn the money for the car. Show them actual examples of if they do A and B over the next three years, they'll earn X amount of dollars and save Z by the time they turn sixteen. If you do this when they are thirteen, they may not be able to go out and get a job, but that's okay. There are other ways to earn money. Determine what extra jobs around the house they can do for an allowance. This would also be a good opportunity to talk to them about entrepreneurship and starting to work for themselves. A thirteen-year-old can mow lawns, wash windows, raise chickens, or any number of other things that they can solicit to others.

Step #3: Talk to your spouse about matching contributions your teen makes to their savings toward their car. You can match dollar for dollar toward a car up to X amount, or you can do a fifty percent match, or whatever you and your spouse determine is fair. This gives your teen an extra incentive to save because he or she won't be doing it by themselves. Be sure to put a cap on how much you'll contribute otherwise you may find that you have a driven teen who earned 20k over three years and you have to keep your word and match it.