Kids don't learn about money and personal finance from their parents by osmosis, and they don't learn about it in school. You need to take an organized approach to teaching them sound financial principles and personal-finance skills if you don't want them to grow up to live from paycheck to paycheck, be financially dependent on you, get deeply into debt, develop destructive attitudes about money, or be unable to make wise financial decisions.

You can start with teaching your kids about the basics of spending, banking, and saving when they are around the age of five. Let them make their own bank deposits and withdrawals, make purchases, and decide what to spend their money on (within reason). Give advice, but don't control. It's important for them to be allowed to make mistakes so they can learn about consequences and choices.

Kids should receive an allowance by the time they're in school. The purpose of the allowance is to teach them about managing money. Help them decide how much of each week's allowance they'll put in the bank. They'll quickly learn that if they spend it now, they won't have it when something they really want comes along. An allowance helps them learn to save and to prioritize. Teach your kids with practical everyday examples when the opportunities arise. Real-life examples will sink in much more readily than abstract lectures with no immediate practical application.

As your kids get older, adapt your teaching to their age and ability to understand. Read some books about teaching kids about money, or check out some of the excellent Web sites on the subject. Teach older kids how to invest by using the Internet to research stocks or mutual funds and set up a mock stock portfolio so they can track their stocks' performance. Teach your teenagers how to balance a checkbook and how to track their earnings and expenditures.

Teach Good Consumer Habits

One of the most important things you can teach your kids is how advertising can influence their buying decisions, and how they can resist giving in to the advertiser's message that buying its product makes kids look cool or makes them feel good. Look at print and television ads together and talk about how the ad makes your kids feel or what the ad makes them want. Help them realize that brand-name jeans, for example, are identical to other jeans, except for the label, but cost a lot more. When buying clothing, agree to pay the cost of good non-brand-name clothes and have your teenager chip in the difference if he or she insists on the brand-name version. This will teach teens about tradeoffs and the cost of image.