how to keep your kids out of debt

Since April is Financial Literacy Month, now is a good time for parents and grandparents to pass along positive money messages to their offspring. Unfortunately, far too many of us subscribe to the “do as I say, not as I do” school of thought when it comes to teaching our kids about finances.

In fact, although 69% of U.S. parents are very concerned with setting a good financial example for their kids, many parents go about it the wrong way, according to a 2014 Parents, Kids & Money Survey conducted by T. Rowe Price.

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Nearly half of parents surveyed (48%) admit to bribing their kids; 28% of parents confessed that they’ve lied to their kids about money; and 30% acknowledged “borrowing” money from their kids’ piggy bank. Most alarming, perhaps, was that 74% of parents admit to having some reluctance to just talking to their kids about money, and 28% say that they are not good with money so they should not be the one to teach their kids.

Even if you feel like you’ve made a financial mess of things, you can still help your kids succeed economically. Here are five ideas to share with your kids and grandkids to aid their financial success and help keep them out of debt.

Lesson #1: Always live within your means

Teach kids the value of a hard-earned dollar and the importance of spending only what they have. Spending more than they earn is a fast track to debt and a slew of financial problems. So make sure that kids understand how important it is to say “no” to something they simply can’t afford.

It also helps to teach them about saving for things they don’t have cash for today; that way they work towards a goal or an item they want—all while learning the art of delayed gratification and living with one’s means.

Lesson #2: Money can always be earned

Whether you’re part of a family that got wealthy by education, business or inheritance, or you come from a family of blue-collar workers, instill the mindset of working hard to earn money and make your way in life.

Kids who understand the concept of earning money in exchange for work will probably be more likely to appreciate the value of a dollar because they’ll understand that it takes effort to acquire it. Teaching kids that you can’t take money for granted can set them up for financial success in the long-term.

Even if you feel like you’ve made a financial mess of things, you can still help your kids succeed economically.

Lesson #3: Credit cards are not a source of money

Even though mom and dad might use credit cards occasionally, make sure kids understand the difference between credit card spending and cash spending.

Relying on credit cards as a teenager, during college, or in the young adult years can set anyone up for financial problems later in life. It can also fuel an unhealthy debt habit.

Make sure kids understand that every dollar spent using a credit card means the risk of paying interest and accumulating debt that’s often very difficult to repay.

Lesson #4: Adopt the 10 percent savings rule

Encourage kids to get into the habit of saving by opening up a savings account and allowing them to earn money by completing household chores. Have kids put away at least 10 percent of their “earnings” into the account and keep track of their spending with the rest.

This simple practice can help school-age kids learn how to manage their money and recognize the importance of saving and budgeting—an essential debt prevention plan.

Lesson #5: Recognize the difference between needs and wants

We live in a society driven by the concept of fulfilling all wants and desires. Unfortunately, many people overlook what they actually need in favor of getting what they want.

Teach kids to take the time to distinguish the difference between their needs and wants so they can make sensible financial decisions later in life. Creating a budget for all needs (basic expenses) and a wish-list for all wants (luxury expenses) can make it easier for many kids to handle money better later in life, and stay out of debt.

Being a Role Model Helps Too

As for your own financial behaviors, learning the basics about credit, money management and the dangers of debt can boost your own economic stability—and aid your children in making good decisions when they’re spending and earning money.

So don’t squander the time you spend with your kids and grandkids during Financial Literacy Month this April. Make the above mentioned lessons fun and engaging—perhaps by sharing both good and bad tales about your own financial lessons—and your younger loved ones will be more likely to learn from them.

As parents and grandparents, we are all in a position to help our children develop healthy financial behaviors. The sooner we impart the five messages above, the better off our children will be.

By teaching the younger generation some basic money lessons as early as possible, we position them to get off to a good start in the world financially, and also help them avoid a lifetime of debt.

Lynnette Khalfani-Cox is a personal finance expert and co-founder of the free financial advice site, AskTheMoneyCoach.com. Follow Lynnette on Twitter @themoneycoach and Google Plus.