by Deborah S. Hildebrand

Created on: April 26, 2009

Teaching Children to be Money Smart: How to Ensure Your Kids are Financially Literate

I remember it as clearly as if it was yesterday. We were at a friend's wedding reception, a group of us standing around talking about buying our first home. The children were running around having a good time, when one precocious six-year-old walked over and stood near her dad. As we continued our conversation, the father expressed his frustration about not being able to get enough money together to make the down payment. That's when his daughter chimed in.

"Well, daddy, why don't you just write a check?"

She obviously didn't understand why we all burst out laughing. But at that moment it was very clear that she also didn't understand how a checking account worked.

With the American economy in it's current state, it is important to help youngsters understand some basic concepts about money and finances in order to as to prepare them to be fiscally responsible adults as well as ease the burden that many families feel when they have to make sacrifices.

It's Never to Soon to Start Learning About Money

While most financial experts agree that understanding cash, credit and purchasing is important for building a sense of financial responsibility in children, determining the proper age to begin teaching children about money is a matter of choice

Some recommend that as soon as children are old enough to count they should be introduced to money. Whatever age you choose, as soon as children become old enough to think and express themselves independently (usually between the ages of seven and ten) they can become familiar with basic money concepts such as different monetary denominations, giving and receiving change, the cost of purchases, and wants versus needs.

The important thing is to communicate with them about financial values - what money is, how to make it, how to save it and how to spend it wisely. Help them to understand early in life that money has to be earned, not given away freely, and that the family has a limited amount to spend each month.

Activities to Help Children Understand Money

Learning anything new can be a challenge. However, placing the information in the context of the everyday world can make it relatable.

If you decide to provide your child an allowance, you can best help them understand the concept of "no free money" by clearly defining what they must do in order to receive their allowance; what chores they must complete and the financial reward for completing each

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