Prepare Your Kids to Deal With Finances...Now

NEW YORK – Kids going back to school are going to learn book smarts, but will they be "money smart" as well? The Jump$tart Coalition for Personal Finance and Literacy reports that in its most recent test of high school seniors' money literacy, the average score was a barely passing 52.4 percent.

You can help your kids earn an "A" in money matters by developing their financial skills early. Here are five tips to get you started:

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Don't reward good grades with money. Janet Bodnar, author of "Raising Money Smart Kids," says that "buying grades" distracts children from the real reward — the sense of accomplishment they should feel. It's OK to use it as a motivator in small amounts over limited periods of time, but it should never be the primary reward. Use an allowance. An allowance is still one of the best ways to teach kinds about managing money. It helps them distinguish their needs and wants and demonstrates the power of saving. Work out a regular schedule and stick with it — and let your child know in advance when she will have an "annual allowance review."

Incentive pay. Encourage kids to save money by rewarding their efforts. Set up a matching program — for every dollar your child saves, offer to put down anywhere from 5 cents to another dollar for it. Such incentives encourage children to save, which can develop into a lifelong habit.

Don't keep your kids in the dark about costs. While it may seem polite to not discuss money, you're doing your children a disservice. Share the restaurant check with them, or talk about how much gas costs each month. If you shield them from costs, you may prevent them from being able to manage their own money when they have to.

Have an idea of what your child spends money on. You don't need to account for every penny, but you should have a general sense of how they spend their allowance or earnings. It will help you anticipate future problems and keep them from spending (or saving) too much.

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