One of the biggest problems with personal debt is that young people are not taught the dangers of borrowing. We live in a world of instant gratification and our standard of living has increased ten fold over the last twenty years.

Consider: Back in the 1950s and ’60s, people thought it was normal for a family to have one bathroom, or for two or three growing boys to share a bedroom. The average American house size has more than doubled since the 1950s; it now stands at 2,349 square feet. Is it wealth? Is it greed? Or is it a simple lack of education?

Students fresh out of school now expect to live in a 2,000 square foot house and have the same things that their parents have accumulated over their entire lifetime. This can lead to excessive long term debt that can burden a person/your child for a very long time.

I grew up in a poor home. We often ate mystery soup and macaroni was a mealtime staple. Despite this my mother taught us one simple lesson on financial responsibility and that was – How to make a budget. I have listed a few points below that you can use to help educate your children and keep managing money fun.

1) Talk to your kids about money. Teach your children how money is earned. Take them shopping with you, show them the prices of items and discuss with them the actual cost of making a purchase.

2) Provide your children a small amount of money each month as an allowance. Depending on the age of the children this should be payment for some sort of work completed. Talk to them about goals and what they should spend this money on. Break down the money that they receive into categories. Show them percentages of what you recommend they spend their money on. 10% Savings 60% Food/Candy 10% Donation 20% Entertainment/Toys – Ensure that they keep the receipts from their purchases so you can sit down with them and talk about what was purchased.

3) Make saving and investing money fun. Start a savings account for your child and let them set the goal. Make them save up for an expensive toy instead of just buying it for them. Start a real or mock investment portfolio for your child and track the progress each week. Spend time with your child reviewing the changes and make it fun.

When my son is a few years older, I will be getting him an electronic piggy bank. The financial acumen piggy bank looks like a great tool and a fun way to get him thinking about managing his money.

This children’s bank that helps young savers learn the value of money. Divided into three separate chambers, the bank automatically tracks how close a child is to reaching up to three different financial goals. (Alternatively, each canister can be assigned to three different children.) The digital monitor displays deposits, automatically tallying coin amounts, while bill amounts can be added manually. Each canister stays locked in place unless its secret code is entered on the LCD touch screen.

If you have anything to add regarding personal finance or would like to share a personal experience – please leave a comment.

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