In order to be money-smart, children need to learn how money is earned, saved, and spent. While talking to them about finances is a good start, they need first-hand financial experience in order to learn life long lessons in money management.

A child is old enough to begin earning money as soon as he or she is old enough to do simple chores. By paying children for doing simple tasks around the house, such as washing dishes or taking out the trash, you can teach them that money is earned and does not come easily. Another good way for kids to earn money is by collecting recyclables, such as aluminum cans. Kids who are old enough and responsible enough to do work such as mowing lawns for neighbors, delivering papers, or babysitting should be encouraged to do so.

Kids should be encouraged to think about the value of money whenever they consider spending it. If a child announces that he wants to buy something, ask him a question such as, "Is it worth washing the dishes twenty times? Because that's how much it took you to earn that money!" A simple, true statement like that can help the child begin thinking in terms of opportunity cost, a concept that eludes most adults. Another way to encourage an intuitive sense of opportunity cost is to remind the child of some more expensive item she may want to purchase. For example, "Are you sure you want to keep spending your money on candy? If you do that, you won't ever have enough for that new bike." Kids who save their money wisely will reap the benefits of patience, while those who opt for instant gratification will regret it when they are unable to purchase what they want to later.

Parents can also send a positive message to children by setting a good financial example. When kids see adults monitoring energy usage to save on the electric bill, clipping coupons to cut grocery costs, and comparison shopping on all purchases, they are likely to retain these lessons later. While children do not always show enthusiasm for their parents' way of doing things, in general, most people end up having similar values and attitudes to those illustrated by their parents.

It's important to "think out loud" when trying to set a good example for kids. Children might see you staring at the grocery shelf before choosing a can of soup, but they can't read your mind. Try saying something like, "Look- this one is only twenty cents per ounce, but that other one is thirty. It only looks like a better deal because it comes in a smaller can- they try to trick you that way!"

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