“Without a working knowledge of money, it is extraordinarily difficult to do well in life,” says Sam Renick, co-creator of Sammy Rabbit, a children’s character and financial literacy initiative. “Money is central to transacting life, day-in and day-out. Where we live, what we eat, the clothes we wear, the car we drive, health care, education, child-rearing, gift giving, vacations, entertainment, heat, air-conditioning, insurance—you name it, money is involved.”

Yet, plenty of parents aren’t helping their kids become financially literate. Are you missing opportunities to talk to your kids about money and finances? If you’re not teaching your kids, someone else will. They will learn lessons about money one way or another. If you want to play a key role in shaping your children’s feelings, thinking, and values about money, you need to give them the gift of financial literacy from an early age. Here’s how...

Start With the Basics at a Young Age

Renick has been teaching kids about money through his Sammy Rabbit storybook character since 2001. He has found that the earlier you start a child’s financial education process, the better. Lessons should begin before age seven, he says, because research shows that money habits and attitudes are already formed by then.

Once your kids are old enough to know they shouldn’t be sticking pennies in their mouth or nose, you can introduce them to coins and cash. Explain what money is and how it is used. Let them see you making purchases with cash so they understand how money works.

If you pay with a debit or credit card, explain to your kids that you’re using your money to make purchases. Show your children receipts with the amount you paid. By repeating this process, it will become comfortable and they will start to understand how money works.

Instill a Habit of Saving

Your kids’ early interactions with money will likely involve spending. They see you using it to purchase things, including things for them. So it’s important to teach them from a young age that money isn’t just for spending—they should be saving money regularly, too.

Learning to save isn’t just an essential money habit, it teaches discipline and delayed gratification. Renick says, “Saving teaches goal-setting and planning. Saving stresses being prepared. Saving builds security and independence.”

Help your kids get in the habit of saving by giving them a piggy bank or savings jar where they can deposit coins or cash. Then use short, simple messages to encourage your kids. Try something like:

• Saving is a great habit.
• I love to save.
• It feels good to save money and build my future.

With young kids, though, you’ll likely have more luck teaching them to save for short-term goals—such as a toy they really want—rather than for the future, says Tim Sheehan, co-founder and CEO of Greenlight, a debit card for kids with parental controls. Encouraging kids to set short-term goals when they are little helps them learn the value of delayed gratification. As they get older, they should be able to save for longer-term goals.

Parents also can encourage their kids to save more by agreeing to match the amount they save dollar for dollar or by a certain percentage. If your children are old enough to advance from a piggy bank to a real bank, you could take advantage of a service such as Greenlight or FamZoo. These prepaid debit cards and apps allow parents to transfer money to their kids and pay them interest—at a rate of their choosing—on any of the money the kids choose to stash in savings.

Create Opportunities to Earn Money

Kids need to have money of their own so they can learn how to make decisions about using it. An allowance can accomplish that. For our son, we require him to do certain chores to earn money. Almost everyone values money they earn differently than money they receive. There are some chores he does without pay because he is expected to help out as part of a family. But if he wants to get paid, he has to complete certain tasks.

If your children are younger, you might consider a weekly allowance in an amount equal to their age. That approach could translate to a “salary” that is deposited directly into their bank accounts each month. Kids could develop critical negotiation skills by asking for raises to their salaries by agreeing to take on additional jobs around the house etc.

Help Kids Learn to Make Smart Spending Decisions

In addition to understanding how money is earned, you can also teach your children how to live within a budget. A friend once said that her teen “spends money like a drunk sailor.” When you pay your child an allowance, tell them that is all the money they will get so they need to manage it. You can create a simple spreadsheet to track how much they have coming in and going out. Learning how to budget now will help them when they enter the real world.

You can also teach kids that spending isn’t always about buying things you want. They will have to spend money on things they need when they’re adults. They can also make the choice to pay people to do things for them. If your child doesn't want to do certain things they’re expected to do around the house, it will cost them. Essentially, they will pay their parents to do those things for them. For every choice they make, there will be a repercussion. Personal finance is about decisions.

Show Kids the Value of Giving

A key reason that it is important for you, as a parent, to teach your kids financial lessons is because you can share your money values through those lessons. If you value giving to others, you can instill that value in your children by helping make it a habit for them from an early age.

You could create spending, saving, and giving jars. Or you could help your kids set up a special savings account for giving.

Then help your children plan their giving by discussing what groups or causes they want to support. They can visit CharityNavigator.org to find highly rated organizations.

Teach Kids How Their Money Can Grow

Saving money is a great habit! But if you want your kids to learn how to truly build wealth, teach them about investing. You can start a custodial investment account so they can invest their money and see it grow. If you don’t understand investing well, you could give your kids a book that explains how it works. Try reading the personal finance classic The Richest Man in Babylon or talk to your financial advisor.

Model Good Financial Behavior

Just as important as the lessons you teach your kids about money are the ways you discuss and handle money when you’re around them. For example, if you complain about having to spend too much on certain things and then take your kids on a shopping spree, you’re sending mixed messages.

Instead, make sure you model the behaviors around money that you want your children to adopt. Encourage your children to do work around the house, but also jump in and help them out. Use those experiences to talk to your child about the importance of work and managing their money.

If you want your children to develop good spending and saving habits, they need to see you making smart spending and saving choices. In short, practice what you preach. And preach with consistency. Educating your children about personal finance is a process that can take time. But if you put in the effort and continuously communicate a clear message about money, you will instill good habits that will serve your children well.