Still, understanding why we tend to buy into scams may help us avoid them in the future. Here are a few ideas about what happens to allow bad deals to go through (and how we can prevent ourselves from being duped).

Limited Math Skills

In one study conducted by the U.S. Department of Labor, researchers reportedly found that fewer than half (about 42 percent) of Americans questioned were able to add two prices together and calculate a 10 percent tip.

And if we aren’t doing well on smaller problems like this, chances are we aren’t scoring too high on the more complicated math required to figure out a mortgage or a car loan. So how can you prevent getting duped by a savvy number cruncher?

• Do your homework. No, you don’t have to crack open an algebra text, but before putting yourself in a high-stress purchasing situation (like signing a car loan), take time at home to figure out what you can afford (in total, not per month). If you’re well prepared, you may not feel as much pressure to accept a higher price.
• Enlist a friend. If you know someone who’s good with numbers, ask for help when you need it. If you feel uncomfortable seeking assistance from a friend, consider visiting a professional credit counselor or financial adviser. Investing a little money for a consultation could save you big money down the road.

Expectations of Honesty

Unfortunately, assuming a seller is going to be honest and aboveboard in financial transactions can raise your odds of getting scammed. The sad truth is that some people will try to deceive you and take your money.

Keep a few important points in mind when dealing with smooth salespeople:

Additional Resources

Consumer Protection Booklet (PDF)

Personal Bankruptcy Information

1. Get your credit limit raised if you can. According to CNN, the U.S. government could reach its set debt limit as soon as November. This (rather arbitrary) limit is set by Congress, and has been raised more than 90 times in the last century—including the most recent adjustment in February, 2009. While you may have a little more trouble convincing your creditors to raise your limit, it’ll be worth the effort if you succeed.
2. Help out your friends. When the government bailed out several banks, General Motors, and other institutions deemed “too big to fail,” it took on a great deal of debt. However, those decision-makers knew that not taking action could have been even worse for the country’s bottom line. Don’t be afraid to help a friend in debt (but don’t expect to be paid back right away, either).
3. Look for budget leaks—then fix them. Economists estimate that “mandatory” spending, such as Medicaid and Medicare, will overtake spending by 2040, unless something is done to fix them today. By identifying these types of growing expenses, you can help keep a bad budget from getting worse (even if there is some debate of how to best fix the situation).
4. Don’t be afraid of a spending freeze. When Congress and President Bill Clinton couldn’t agree on a new budget in 1995, much of the federal government was shut down—for of total of 28 days between November, 1995 and January, 1996. While the shut down was as much political as economical, it shows that when no new money is coming in, the best thing may be to stop all money going out.
5. Remember your obligations. One option the government has to add some room in its budget is to sell off Freddie Mac and Fannie Mae—which are worth around $165 billion, according to CNN. However, doing so could create havoc in the stabilizing housing market, and ultimately would likely do more harm to the national budget than good. Likewise, cutting Social Security, Medicare, pensions and other entitlement programs could help a lot of spending obligations, but would also likely upset the government’s top source of income—taxpayers.

Part One: A Hobby

My mother’s student (we’ll call her “Emily”) loved to bake. She’d make coffee cakes and breads and desserts. She made so many, in fact, she had to give them to neighbors and friends because her own family couldn’t eat them all.

Naturally, this pleased the neighbors, and Emily’s mom was happy her daughter was developing such a useful (and tasty) skill. But she also saw the opportunity to help her daughter develop another important skill: personal finance.

Part Two: A Business

Like many successful enterprises, Emily’s began when she decided (with her mother’s prodding) to make a profit by doing something she loved. Here’s what Emily’s mom explained to her (and you can explain to your kids):

• Ingredients cost money. Sure, kids know this on some level – but making them aware of the exact dollar and cent amount is a good way to help them understand the value of money.
• People are willing to pay for baked goods. Again, this may be common sense for anyone who’s ever been to Dunkin’ Donuts, but kids may not realize that someone would want to pay them to do something.
• Making money is fun – and work. Emily’s mom helped her calculate the cost of each baked good she made, determine a reasonable price to sell them for, and promised her she could keep any profit she brought in – on a couple conditions.
• Saving is crucial. Emily’s mom opened a savings account for her daughter, who socks away a portion of her profits.
• Giving back is important. On the first day of school this year, Emily headed into the finance office to donate $30 of her own money – not bad for a nine-year-old.

Part 3: Learn from Emily

This story illustrates all the classic financial literacy advice – for one thing, your kids are never too young to start learning how to manage money. Plus, it serves as a reminder that we should be encouraging children to pursue activities that make them happy – profits can come from unexpected places.