by Raven Lebeau

Created on: October 07, 2009

Parents often want to shelter children from the worries of the adult world. In many houses, things like bills, mortgages, and salary are not openly discussed. While children are not capable of understanding all of the complexities of the adult financial world, they do learn from the examples of their parents. By being a positive financial role model, you can help your child develop a healthy attitude toward money and saving. There are also active ways to encourage wealth-building for children. Here are some strategies for raising money-smart kids:

1. Be an ad-cynic.

As you watch TV with your child or walk through the mall on a family shopping trip, take the time to point out how advertisers attempt to trick us into wanting and purchasing their merchandise. Think out loud by saying things like, "Yes, it's 20% off, but since we don't actually need a new one, we would still be wasting money!"

2. Let your child see you struggle with savings.

Saving money is not easy when there are so many temptations. Never hesitate to say something like, "I'd really like a new TV for the bedroom, but we need to make sure we have enough money to fix the car." When you share this type of thought process, you show your child that saving is a matter of weighing wants against needs. Hopefully she will adopt those thinking patterns as her own.

3. Give your child opportunities to earn.

Even very young children can start earning money for helping around the house. When a child is old enough and- more importantly!- responsible enough, he can look for work outside the home such as doing odd jobs for neighbors, babysitting, or petsitting. Having earned his own money, a child is more likely to save it for than if the money were simply given to him.

When the child wants something, such as a toy or money to go to a movie, she will have to choose whether the thing she wants is worth spending her own hard-earned cash. Being able to make these difficult decisions is part of being financially responsible. The child who spends his money and cannot buy what he really wants will also learn a valuable lesson about the consequences of frivolous spending.

4. Match your child's savings.

As adults, we have opportunities to make our money grow with investments such as 401K plans and CDs. Having your child open a savings account is a good start, but the interest earned on a savings account is not enough to be motivating to someone with a small investment. In order to reward your child for saving, you can provide your own "bonus" by matching what she puts into the account, or at least matching a portion of it. The lesson learned is that, in finance, we can often trade a small amount of money now for a larger amount later.

5. Have your teen pay for his or her own car (and its insurance), cell phone, and other luxuries.

Teens old enough to drive are old enough to work a part time job. When a teen has to budget for gas and insurance, he will see how difficult it is to have money left over after paying major expenses.

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