Six Steps To Money-Smart Kids

Kids have more access to credit cards than ever before. In fact, nearly one in three high school seniors uses a credit card — and that jumps to 83 percent of students once they hit college.

But that doesn't mean that kids know about money management: In a survey by Capital One and Consumer Action, only 44 percent of teenagers said their parents taught them about managing money.

Don't let your kids fall into the other 56 percent. Carl George, chairman of the American Institute of Certified Public Accountants Financial Literary Commission, says there are six basic steps parents can take when it comes to teaching their kids about money:

Impress The Importance Of Making Good Choices — And Start Early, When The Consequences Of Bad Money Management Are Not Dire

You want to demonstrate to kids that they can't have everything they want, and choosing between, say, a desktop computer and a notebook is a the type of financial decision they'll be faced with for the rest of their lives. And if you're child makes a mistake, it's important to let him or her deal with the consequences — so don't swoop in and buy her a laptop after she realizes that the desktop was not the way to go.

Set Limits

Children need boundaries and that definitely applies to money. Make sure your students know how much they can spend on certain goods, especially if they don't have to pay from an allowance.

Set An Allowance

Give your kids some discretionary money of their own and let them manage it. Give them some guidance when it comes to spending the funds.

Encourage Work

While there's some debate over whether high school students should have jobs, George believes that as long as it doesn't interfere with schoolwork, a part-time job can teach kids valuable money lessons.

Teach Kids Value

While you can show kids how to exchange money early on, it's much harder to demonstrate the value of money. Here's a good way to start: "When they want a toy, ask how important it is to them, on a scale of one to five. All kids will answer five. After they've had the item for a week, ask that question again. Rather than telling them the toy they want isn't worth the price, you're helping them develop the ability to make their own judgments."

Model Good Behavior

If you give your kids an allowance, give it to them on time, in full and as promised. If you ask your kids to give to charity, demonstrate that you do so as well. The same goes for savings.

By Marshall Loeb