According to studies, about 75% of young adult Americans live with poor financial skills. These people have very low financial IQ. I should say, they barged into debt problems early on in life because their financial independence came at a point when they are not prepared for it. They were not schooled in budgeting, managing credit cards, or saving.
To keep your own children from potential heartaches, sit with them and walk them through the rudiments of finance. Teach them the importance of saving. Let them open their own bank account. Help them track how their money grows so they are motivated to save and keep on saving.
Let them get part time jobs during vacations. These should allow them to appreciate the value of money. Teach them to prioritize expenses. Let them develop their own register where they would deduct their expenditures from their cash balances. This way, the visual representation of the rise and fall of their money will develop a psychological effect of spending only for what is important.
When you see their progress, slowly allow them to hold a card – debit card not credit card. Debit cards are prepaid so you can set their spending limits. Nonetheless, you need to set up rules on the use of the debit card. Let them do their purchasing under a controlled environment.
At the final analysis, prevention is the key to keep your children debt free. You have the major role of teaching this valuable insight to your children until it becomes a lifestyle for them.