April is financial literacy month, which is as good a time as any to look at some of the fundamentals of personal finance topics. One topic that is often overlooked is financial literacy for children. Personal finance and related topics are subjects I don’t think our school systems focus on enough, which leaves financial education up to the parents or the child’s initiative.

When should you have “the talk?”

My daughter is only 9 months old, and since she can’t speak coherently yet we have been able to avoid having “the talk.” You know, when your little one asks you for the first time, “Daddy, where does money come from?”

An uncomfortable silence fills the air and for a second you think you can get away with changing the subject. But your child asks again and you know you can’t stall forever.

OK, I’m joking, but money is an abstract concept that isn’t always easy for children (and some adults) to understand. I think the best way to teach children the concept of money is with hands on experience starting at an early age.

How can you get children involved?

You can involve your children with money at almost any age. It can be as simple as explaining purchases when you are out and about. For example you can make it a point to help when you check out at the grocery store or you pay for a meal at a restaurant. You can also involve children with money by giving them their own money to use for saving, spending and giving.

Here are some more money management tips for children:

  • Set an allowance.
  • Have them use their own money for purchases.
  • Teach them about saving and giving.
  • Open a savings account in their name.
  • Start an investment account in their name and teach them to track investments.
  • Offer to match their savings contributions.
  • More tips in the free USAA webinar, Kids and Money: Practical Tips for Parents.

Make learning fun. You can turn learning about money into games or use a board game such as Monopoly or Life. You can also use online games or tools. One new example is Planet Orange (orangekids.com), from ING Direct. Planet Orange is a free financial education site with a space theme. It is designed to teach children the basics of earning, spending, saving, and investing.

It’s never too early to start

As you can see, I was joking about teaching my daughter about money – she is way too young. But I am already setting the foundation and starting her on a strong financial path.

Shortly after she was born my wife and I opened a savings account and college savings plan for her. The current goal is to make automatic contributions so that over time, she will have a substantial amount of money saved for her college tuition, and hopefully have a decent amount of money in savings.

A couple notes about opening joint savings accounts: You can easily set up multiple savings accounts with most online banks, and some of them, including ING Direct account and Ally Bank feature the ability to create sub-accounts, which is an easy way to create accounts within an account for targeted savings.

Bonuses for opening College Savings and ShareBuilder Accounts

Opening accounts for your children is a good way to get them involved with saving money understanding how savings and investments work. Right now there are a couple ways you can open a new financial account for your little one and get a bonus in the process (actually, you can use these bonus offers for yourself as well!).

$25 bonus from College Advantage. Right now, College Advantage is offering new account holders a $25 sign up bonus when they open a new 529 College Savings Plan with a referral code (the best part is that you can then refer other family members and friends and receive a bonus referral as well – we used this to get several hundred dollars in bonuses!). You can get full details about the bonus offer and a review of the plan in this article: College Advantage 529 Plan Overview and $25 New Account Bonus.

The College Advantage plan is an OH based 529 college savings plan, but it is not limited to OH residents. Residents from any state can open an account.

$51 bonus from ShareBuilder. Get a $51 dollar bonus for all parents/guardians who open a new ShareBuilder custodial account this year. Use promotion code Planet51 and deposit $50 before 12/31/2010 (not valid for IRAs or ESAs). See these ShareBuilder coupon codes for more ShareBuilder bonuses.

Do you have tips for when and how to teach your children about money?

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