Booyah Breakdown: Teaching Your Kids About Money

Kids today are up to their necks in debt. It's time we teach them the value of a buck.
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Back on June 14, Cramer did a

special show

on how to educate our kids about stocks and money. He said that we need to "teach our kids the basics, because they're not going to learn them anywhere else."

He's right. Tons of kids are financially illiterate. In a national personal finance survey, 68% of 4,000 student respondents failed. Spending by U.S. teens exceeded $175 billion in 2001 -- that's equal to Mexico's exports. In addition, teens spend 98% of the money they receive. So they're not saving.

And it's no surprise that they're racking up debt too. Teens entering college are offered an average of eight credit cards during the first week of school. That's on average. (Some people, like my son, get their first credit card application when they're only 3 weeks old.) Most college kids have about three credit cards while in school; as a result, 45% are in credit card debt.

Ignorance and money are a dangerous combination, so it is very important we help the kids. And the Booyah Breakdown is going to offer you some good tips to get started, because it's never too early to start talking to your children about money.

Teach the Peanuts

Talking money to your kids is clearly determinant on your kids' ages. Don't even bother talking to your 3-year-old about your


(AAPL) - Get Report

shares. She'll just want to snack on them with peanut butter.

But you can discuss the concept of money with them. "Start talking to them when they start saying 'I want,'" says Neale Godfrey, chairwoman of the Children's Financial Network in Chester, N.J. and author of

Money Doesn't Grow On Trees: A Parent's Guide to Raising Financially Responsible Children

. She suggests age 3 (although I swear my kids were saying that right after their second birthdays). At that point, you can begin to teach them that they get things when they earn them.

One way to do this is to have them perform simple little chores and give them an allowance upon completion. My kids get $1 a week if they make their beds every day. That may sound like a pittance to some of you, but to my 6-, 5- and 3-year-olds, it's a pot of gold. And I get cheap labor -- a 3-year-old who makes her own bed for only a buck. How about that?

Another suggestion is to buy them a piggy bank and insist they put some of the money grandma and grandpa give them in it. Start the notion of saving as early as you can.

And then take a trip to the bank. "A 5-year-old is ready open a bank account," says Godfrey. Your kindergartener can see how his money grows as he saves it and can start to understand the idea of earning interest on it.

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


(MCD) - Get Report

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


this weekend, let them know that


(DIS) - Get Report

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) - Get Report

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.


(GME) - Get Report

, the maker of video games, is a much better stock for a kid to watch and understand than

Goldman Sachs

(GS) - Get Report


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!

Tracy Byrnes is an award-winning writer specializing in tax and accounting issues. As a freelancer, she has written columns for and the New York Post and her work has appeared in SmartMoney and on CBS MarketWatch. Prior to freelancing, she spent four years as a senior writer for Before that, she was an accountant with Ernst & Young. She has a B.A. in English and economics from Lehigh University and an M.B.A. in accounting from Rutgers University. Byrnes appreciates your feedback;

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