In the U.S., credit card debt has recently topped $1 trillion, and of those American households that have credit card debt, the average household owes an astounding $16,048. If you consider that in 2016, only 17 states mandated that all high school students take a personal finance, it’s safe to assume that credit card debt will only go up. Tossing our young adults out into the world without any real education on how to manage their finances is just adding fuel to the already out-of-control inferno.
What can you do? Besides talking to your school’s educators, the Department of Education, and your state’s representatives about financial education mandates for all schools, there are some steps you can take at home to ensure that your children have the skills they need to lead a life free of major debt.
How do I teach my child about financial responsibility?
Start Early
Children as young as 3 years old can understand the basic concept of saving money; begin their lessons as early as you can. Start with lessons about how to buy something you want, even though it means waiting. We live in a society of instant gratification, where we can watch anything on TV at any time, get information instantly with our phones, and can purchase anything our hearts desire on the Internet with a few clicks. The sooner you can teach your children that some things require a bit of patience, the better off they’ll be.
Play “Store” with your little one. Set up a store using toys or boxed and canned groceries and give your child play money to make purchases using only the money you’ve given. Mimicking parents’ behavior by shopping is fun for young children; they will love this game and not realize they are learning.
When your young child finds a desired toy, have him or her start saving for it. Keep reminding the child of the goal. Make sure this is an easily attainable goal to ensure success. When the child finally has enough money saved, make a special trip to the store for the purchase.
Want vs. Need
There is a big difference between want and need, and the sooner you can teach your child this concept, the sooner you’ll eliminate those meltdowns at the store. The grocery store is a great place for this lesson. As you shop, ask your child, “Want or Need?” for each item. Healthy items are needs, while cookies and candy are wants. Allow the child to pick out one or two want items, but stress that these are merely treats.
Budgeting
Teach your child the importance of sticking to a budget. Give yourself a realistic budget for the grocery store, and have your child help you find ways to purchase the items you need while staying under budget. Offer a prize for staying under budget, and bring a calculator to allow the child to help you track spending. Show how much you can save by using coupons and buying store brands. This will teach your child how to be a smart consumer in adulthood.

Allowance
Many people believe that chores shouldn’t equate to money, that they are simply a responsibility for being part of a family. While this may be true, having your child earn money before old enough to get an actual job is an important tool in teaching financial lessons that will carry into adulthood. If your belief is that your child shouldn’t receive a reward for doing chores, you could still set up extra chores that offer a little money. This will help teach the importance of saving.
Some people have found that allowances don’t work with older kids who may think the money isn’t worth the hard work. If this is the case, talk to your child about what you provide for them, such as food, clothing, shelter, and transportation. State that none of it is free, but chores are a way to pay it back. If your child puts up an argument, add a chore to the list. If that doesn’t work, add another chore to the list. For this to be effective, make sure that you’re not simply buying everything the child wants.
Saving
If your child has an allowance, go ahead and set up two or three jars or banks for the money. A portion of the total should go in the “Spend” bank, usable on whatever he or she wants. Another portion goes into a “Save” bank, which is not to be touched. The optional final portion can go into the third jar called “Give.” Allow your child to choose a charity to support.
Continuing this practice even as your child ages and gets a job and bank account will teach the skill of saving, that it’s OK to spend some money on things you want, and the importance of giving to those in need.
Lead by Example
Doing these exercises with your children means nothing if you are not leading by example. It’s never too late to start being financially responsible yourself. Don’t shield your older children from mistakes you’ve made; they can learn from them as well. Seek the help of a financial planner to come up with a strategy, and show your children your goals as well as how you plan to meet them.
By considering personal finance one of the important lessons you teach your children as they grow, you’re giving them the skills they need to be successful happy adults without a big cloud of debt hanging over their heads.