by Gilda McHenry

Experts agree, talking to children early and often about how money works prepares them to make good financial decisions later in life.

At what age should parents start teaching their children financial principles? “As soon as they start saying, ‘I want, I want’ — about 3 years old,” says Neale Godfrey, author of Money Doesn’t Grow on Trees: A Parent’s Guide to Raising Financially Responsible Children (Simon and Schuster, $13). Here are skills you can teach kids at various ages.

Preschool (ages 3-5)
“Children don’t need to understand all the ramifications of personal finance at this age,” says Laura Levine, Executive Director of Jump$tart Coalition for Personal Financial Literacy, which encourages K-12 financial curriculum enrichment.

Teach children to identify coins. Younger children can group coins by size and color. As they get older, Commerce Bank’s WOW!Zone recommends using coins to assist them in counting exercises (with a penny representing 1, a nickel 5, a dime 10 and so forth).

Introduce the concept of bartering to little ones, says Marlena Jareaux, author of 26 Financial Things to Teach Your Parents (Beach Publishing, $10.95). The act of exchanging goods for other goods can pave the way to understanding how financial transactions work. Children can trade simple objects with one another, such as trading cards or stickers.

Teach about delayed gratification. Stress the benefits of planning and saving versus buying on impulse. Commerce Bank's Wow!Kids suggests creating a savings chart using stickers so kids can see how close they are to achieving a savings goal. Stickers can be earned for good behavior or for helping around the house.

Don't establish exorbitant savings goals. “For a five year old, a couple of years can be a lifetime,” says Levine.

School Age (ages 6-9)
“This is an impressionable age,” says Jareaux. “You don’t want to miss out on any teachable moments.” Everyday opportunities can go a long way in teaching the value of money.

Explain financial transactions such as those that take place at the ATM machine or the grocery store.

Consider giving your child an allowance for assisting with household responsibilities. A dollar per week for each year of age is one approach (a 7-year-old would earn $7 per week).

Offer guidance budgeting money. For example, Godfrey suggests allocating 10 percent for church or a charitable organization of your child’s choosing. The remaining 90 percent can be divided equally into cash, medium-term savings where the goal is a purchase or an event a few weeks away, and long-term savings, such as for college.

Don't give an allowance if your child is not helping with responsibilities. Doing so could cultivate a false sense of entitlement, says Godfrey.

Tweens (ages 10-12)
Your tween is now more independent in word and deed.
Help your child set personal financial goals, but keep them relatively small, like saving for PlayStation games.

Supplement allowance with additional earnings. Extra chores such as vacuuming or raking the leaves can earn money and teach life skills.

Introduce your child to stocks. Purchasing a few shares in your child’s name can pay dividends in awareness.

Don't be a negative example. Your kids are watching. Shop within your means and avoid impulse buying.

Teens (ages 13-18)
Now is the time when preparing your child to be financially responsible becomes more important than ever. For many parents the biggest difficulty will be moving beyond the stigmas and taboos often associated with money.

Discuss your paycheck with your teen. “In many cases, a teen’s first introduction to taxes is his first paycheck,” says Jareaux. This can be quite disheartening. Explain the difference between gross pay and net pay.

Let your teen see the family budget, including monthly income and expenditures. Understanding credit card statements and utility bills can give your child a new appreciation for the financial decisions you make.

Give your teen a budget for clothes or holiday expenses and let her shop for herself. Allowing teens to make mistakes can lead to discussions about the pros and cons of their choices and how they might do better. “Don’t criticize their decisions,” says Levine.

Don't be quick to give your teen a credit card. Often parents pay the bills and the lesson gets lost.

Gilda McHenry is a local freelance writer.