Booyah Breakdown: Teaching Your Kids About Money

Hone in on the 'Tweens

As your kids get older, you can then introduce them to the concept of a stock.

"Middle school is a good time to do it," suggests Janet Bodnar, author of Raising Money Smart Kids: What They Need to Know about Money and How to Tell Them.

Especially if you make it concrete, she says. Buy them a share of stock in McDonald's(MCD Quote) and go have lunch there. Explain how they are now part owner of the company, so if McDonald's makes money, they do too.

Then start to talk to them more about the companies that own the products they use. After you see Pixar's new animated movie Ratatouille this weekend, let them know that Disney (DIS Quote) is the parent company who owns the movie. Explain that Disney also owns ESPN and ABC, not to mention those fabulous theme parks.

"And once you've piqued their interest, make the world your classroom," says Godfrey. Take it a step further and talk about how the economy affects the stock price. For instance: "If gas prices are going up, how will that affect Disney's stock? Will people keep driving to the theme parks?"

Or drag them to the food store and have them find four products that Procter & Gamble(PG Quote) make. They would probably be surprised to now that Crest, Charmin, Pampers and Duracell are all P&G products.

Focus on products they can understand. GameStop(GME Quote), the maker of video games, is a much better stock for a kid to watch and understand than Goldman Sachs (GS Quote).

Many middle school kids will start to play stock market games in school that help teach them the basics. These games simulate the market and show them the numbers behind their buys and sells. Just be sure to help them understand that the real stock market is not a game, says Godfrey. You need to reinforce the notion of buying and holding, because the last thing you want is for them to think the market is for daytraders.

So don't be afraid to talk about money with your kids. That way they will understand from a young age the importance of saving and investing wisely -- so they can take care of you when you're old!