Gab About Gotta-Have's: Advertisements -- on billboards, in magazines, or on television -- offer an easy avenue to discussing the most basic (and yet amazingly tricky) financial concept, one that's at the heart of any budget: Do you need something or do you want it? As your child begins to understand this distinction, around kindergarten age, use family time to discuss and even list the things you all want versus what you need. Including parents in this exercise makes it especially powerful. This is a great opportunity to gain an understanding of your kid's values and preferences. And because it's at the heart of financial literacy (and, some would say, our current economic crisis), the discussion should continue on through her teens.
Explain the Great Divide: "Ordinarily, kids see parents do only one thing with money, and that's spend it," says Godfrey. "They don't see us budget, pay bills, save, give it to charity, or earn it." To start introducing those concepts, try this activity: Get a handful of nickels, dimes, and quarters, and attach a sticker to each coin that shows where that part of the dollar goes in your family budget. A quarter might be labeled "Taxes," another quarter "Housing"; a dime might be what you spend on vacations, and another dime might go to savings. When he begins to understand that this is where a bit of every dollar goes, he'll have a better understanding of how much money is left for impulse purchases like those overpriced Mylar balloons floating above the checkout line.