Raising Money-Savvy Kids

Question of the week:I'm the father of two young children and I want to do everything I can to make sure they know how to make good financial decisions when they grow up. What should I be doing to teach them about money? --Denver Dad

Dear Denver,

Your kids are lucky to have a parent thinking about teaching good money skills. When we polled Armchair Millionaire community members about how much their parents had taught them about money and investing, a resounding 79 percent said, "Nothing." We also asked them to tell us how they are teaching their own kids, and got a range of good ideas:

Model good behavior. "Let your actions speak for themselves. Young people are going to emulate the people around them so if your kids see you being reckless with money, there's a good chance they'll follow suit." --Marcus

Let them in on the family finances. "I made an enlarged copy of a check that I had written to American Express in the amount of $1,107.48. I showed it to my nine year old and his eyes got as big as quarters! Now he knows that plastic credit cards are not actually endless sources of money." --Tammy S.

Start young. "As soon as kids are old enough to ask for cookies, comic books, and/or cash, they are old enough for their first of many financial awareness discussions." --Perry

These days, when our paychecks are deposited automatically and our cash is spit out of ATM machines, it can be challenging to teach kids the real value of money. The key is to set them up to succeed while grounding your lessons in real life. Lectures about saving and investing will mean little if your kids don't have the opportunities to experience their own achievements and failures with money. My checklist provides some ideas on raising financially literate youngsters.

The Armchair Millionaire's Checklist for Raising Money-Wise Children

• Entice them to save. Help your child set up a savings account and get them going with a $50 or $100 deposit. Offer to match some portion of every dollar they save, and be sure to review their account statements with them so they understand the contribution that interest is making to their grubstake.

• Teach smart spending. Let's not forget the other side of the coin-spending. If kids don't learn about living within their means, all your good advice about saving and investing will add up to naught. Help them make a realistic budget and stick with it.

• Show how much debt really costs. If your child asks for a loan, help them out, but charge a realistic rate of interest--and insist they pay it. They'll quickly learn how expensive it can be to use other people's money.

• Start them in stocks. Investing will stop being an abstract concept the moment your kids have some stock of their own. You can start them out with a gift of one or two shares of a well-known company (check out gift stock brokerages like, www.oneshare.com) and follow it with them weekly in the newspaper or online. As they get older, help them buy stock themselves through a dividend reinvestment plan. Offered by many blue-chip companies, these plans allow small stock purchases of a single share or even fractions of shares. Most have low initial minimum requirements and many allow regular additional monthly investments of as low as $25. You can find complete information on these plans at www.netstockdirect.com.

THE BOTTOM LINE: The financial lessons and habits learned in childhood can last a lifetime. To help your child grow to an adult who wisely handles money and investments be a good role model for them and teach them through real-life learning opportunities whenever possible.