First and foremost, talk with your kids about money. "Kids are not going to learn it in school, so it's really up to the parents to teach some basic lessons," says AuWerter.
While most parents would rather talk about the birds and the bees than discuss their family finances, money shouldn't be a taboo topic. Many parents want to protect their kids from the stress that money discussions can bring, so they don't say anything at all. That's a big mistake. Open up discussions about money; talk to your kids about credit cards, the family budget, investments, etc. You don't want your kids to worry if you suddenly start talking about money because a problem crops up. It should be an everyday topic and your children should be involved.
Be sure to start these discussions - and subsequent teachings - at a young age. A child as young as three can have a piggy bank. Buy a clear one so they can see the money grow as they continue to add to it. As a parent, you also should use cash around your young kids when you're in the stores. This strengthens the association that money is used to buy things, not a piece of plastic.
"Money has become a very abstract concept," says AuWerter. "We use credit cards for everything." We even handle our banking online. Kids need to see that money is a concrete thing. Let your kids give the money to the person working the cash register and handle the change.
Another important way to teach your kids about money is to put them on the family payroll. In other words, pay your kids an allowance. It opens the door for all sorts of basic personal finance issues, like spending and saving. However, don't get too controlling. How your child spends the money is their decision. It's their money, they can do with it what they want - within reason. If they're saving for a big purchase, help them figure out how long it's going to take. Encourage them by helping them earn some extra cash; give them a few extra chores.
Consider creating a "company matching program". With older kids who can take on part-time jobs or summer jobs, "It can be a good idea to match their earnings and then invest that money on their behalf," says AuWerter. You can even open up an IRA account. It will look like a brilliant idea years down the road. Get your kids involved in the investment process. Explain to them what stocks and mutual funds are and how they work. The fact is, they probably won't learn this in school, yet it's one of the most important life lessons they can get.
Finally, get them some plastic. The average college student graduates with more than $2,000 in credit card debt. Your best bet is to educate your child about credit before they're off on their own. "You want them to be smart about it even before they head off to school," says AuWerter.
Get a prepaid card for your high school-aged child. Be sure to include a conversation about budgeting and not buying something until you have the cash in hand. A good debt lesson can save your child a lot of financial headaches later on.
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By Stephanie AuWerter