by Paul Richard

Money gives people -- both young and old -- decision-making opportunities. Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend. Everyday spending decisions can have a far more negative impact on children's financial futures than any investment decisions they may ever make. Here are 5 simple ways to introduce children to personal finance and managing money:

1. As soon as children can count, introduce them to money. Take an active role in providing them with information. Observation and repetition are two important ways children learn.

    

2. Communicate with children as they grow about your values concerning money --- how to save it, how to make it grow, and most importantly, how to spend it wisely.

    

3. Help children learn the differences between needs, wants, and wishes. This will prepare them for making good spending decisions in the future.

    

4. Setting goals is fundamental to learning the value of money and saving. Young or old, people rarely reach goals they haven't set. Nearly every toy or other item children ask their parents to buy them can become the object of a goal-setting session. Such goal-setting helps children learn to become responsible for themselves.

    

5. Introduce children to the value of saving versus spending. Explain and demonstrate the concept of earning interest income on savings. Consider paying interest on money children save at home; children can help calculate the interest and see how fast money accumulates through the power of compound interest. Later on, they also will realize that the quickest way to a good credit rating is a history of regular, successful savings. Some parents even offer to match what children save on their own.