How to Teach Your Kids Financial Independence

Teaching kids about money in today’s consumer-driven culture is a big challenge for parents.

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Mary Hunt founded the website Debt-Proof Living after her family paid off more than $100,000 in unsecured debt. She's the author of several books, including 7 Money Rules for Life, Debt-Proof the Holidays, and Live Your Life for Half the Price. Her latest book, Raising Financially Confident Kids, comes out in August.

U.S. News chatted with Hunt about the challenges parents face in teaching kids about money and preparing them for financial independence. Excerpts:

How do you think today's consumer-driven culture is affecting kids and what can parents do to counteract that?

The culture in which we live tells us it's okay to want everything now and pay for it later. And children are seeing that modeled from the moment they're born. Nothing's real. Everything is paid for with plastic or some kind of digital transfer of funds. Children usually can't process that kind of abstract information. So, generally speaking, they're getting a very skewed view of what life is really like.

[Take our Quiz: Are You Spending Too Much on Your Children?]

How do parents counteract it? I think the very, very best way to do that is through education. But before they're able to do that, parents have to know where they stand on these issues. Is society going to be the driving force that determines the curriculum of thoughts that they're going to teach their kids or are they going to reach deep into their own hearts and souls, establish their own values? And then do everything they can to make sure that their children are insulated, not isolated, but that they're insulated as they go out into the real world. Insulated with truth and knowledge and the ability to manage money.

For parents who can afford to buy them a car or the latest iPhone, how do they balance the desire to give their children the best and help them to fit in without sending a message of entitlement?

I think if parents could step back and maybe use another illustration rather than money when they think of these things. I don't know a parent in the world who would allow their child to eat a gallon of ice cream just because they can afford it. A wise parent knows that too much of a good thing is a bad thing.

Even though they're able to do these things, they need to look at a much larger picture of how is this preparing my child for the real world. What is this doing to get them ready for living on their own? Parents teach their children good manners and personal hygiene. I don't know why parents are so unwilling to set any kind of limitations when it comes to money. What does it look like when mommy puts a piece of plastic into the wall and out comes money? Parents need to counteract that with education.

[See Want to Start Investing? Here's How to Find the Money.]

It's easy to prepare someone. It's really difficult to repair someone. Parents are looking at how their teaching is going to prepare their child for life in the real world—a life where they can prosper, a life where they are not going to be derailed by consumerism.

If you are a parent who struggles with issues like unemployment or credit card debt, how much do you share that with your children?

I'm convinced that children need not be required to carry adult-size problems or challenges. We have to remember that children's emotions are very, very extreme.

Secondly, they don't know how to process things in terms of time. Children who are made aware of the poverty that they live in see that as a life sentence. They don't have the life experience to know that things change. So, I think parents need to be very, very careful about not sharing that. But on the other hand, I don't think they should share all the good, either.

Parents need to be wise about what they share with their kids, but that doesn't mean that they don't share the principles. "Look at this preapproved credit card statement that came in the mail today. This company wants us to take their credit card and to do this and this," and then you go through the little lesson.