Money Sense: Early Money Lessons Made Easy

There is NOT a little printing press in those ATM machines printing money and spitting it out on demand...

Today's kids need more financial know-how than ever before. Changes in our very culture have led to a generation of children with the most money available to them, the most pressure to spend it, and the least knowledge of how to manage their money in history. Experts in family finance say parents can - and should - begin teaching their kids how to manage money as early as the elementary years. Where do you begin? These tips will help you get started:

  • Take advantage of circumstances that arise in daily life. If you drive past a fast-food restaurant and your kids beg for lunch from the backseat, your first instinct may be to say, "I don't have the money for that today." But when a child responds by directing you to the nearest ATM, you've got some explaining to do.

"Kids really do think - as many adults do - that there's a little printing press in those ATM machines printing their money and spitting it out," says Janet Bodnar, deputy editor of Kiplinger's Personal Finance magazine and author of five books on kids and finances. "You have to say, 'Really, the bank is a big piggy bank that we put money in that we make from working. Just like when your piggy bank is empty sometimes until you put more money in, ours is like that too.'" The conversation requires little effort, but teaches kids a valuable lesson about money.

  • Let your kids in on the decision-making process for major purchases. Financial consultants Eileen and Jon Gallo, authors of The Financially Intelligent Parent, recommend including kids in discussions about big purchases, such as buying a new family car.

Bodnar agrees: "Tell them things like, 'We're not going to get a big-screen TV because we don't think it's worth it. We'd rather spend money on other things, like that vacation at the beach.' Share your thought processes with them. These are lessons they're learning."

  • Be more open about money with your kids. "Parents worry their kids are going to ask embarrassing questions, like how much they earn, and then they'll blab it to their friends," Bodnar says. "But what kids are really fishing for is 'How well are we doing versus other families?' You can tell them, 'We make enough to buy the things we need with some left over to give away or to put into savings.'"

- Deirdre Wilson