Top 7 ways to raise a money-smart kid

While it may seem you have more pressing priorities than teaching your child to be a smart spender and saver, keep in mind that the consumer culture is working on your child already. "Kids are constantly being bombarded with messages to spend money, and we need to counteract that," says Sam Renick, financial consultant and children's author. "The earlier kids start developing good money habits, the better."

The good news? Teaching your child how to handle money is simpler – and more fun – than it sounds. Here are seven tricks to turn money lessons from a fight into a delight:

1. Hand your preschooler a buck.

Just because a child can't change a dollar yet doesn't mean she shouldn't experience the dollar itself. Exposing children to money sets the groundwork for financial literacy in the same way that reading out loud to them sets the groundwork for literacy.

In the preschool years, some hands-on experience is enough. Preschoolers learn best when they can actually hold what they're learning about. So get over any germophobia around coins and bills and let your 3-year-old hand a fiver to the cashier. Let your 4-year-old help you drop spare change into a savings jar. Pretend games like "store" or "bank" are also a fun way for preschoolers to grasp that money buys things.

And don't stress if she confuses a penny with a dime or if you catch her using a stack of play money for a doll bed. At this age, it's all good.

2. Dispose of "disposable thinking."

From broken toys to outdated TVs, almost everything gets tossed in our culture. By teaching your child the value of things, you set a cornerstone of financial literacy. "Kids can learn that possessions deserve our care. If your child throws a book, explain that throwing books can damage them, and that treating them gently helps them last a long time," says elementary teacher Laura Gerrity.

If something does break and your child cavalierly says, "It's okay, we can just get another one," take advantage of the teachable moment. Gently explain that replacing it would cost money, and that you'll need to decide whether spending that money is a good idea. This may lead into an interesting discussion of all the other things that cost money, such as food, rent, and gas.

When your child outgrows some clothes, ask her to help you wash and fold them so they can be passed along to a smaller neighborhood kid or to a family shelter. Shifting from a "break it, chuck it, replace it" attitude to a "waste not" attitude can help even young children build a foundation for sound money habits.

3. Encourage delayed gratification.

"I want it now!" How many times have you heard that – this week? Kids by nature want immediate gratification, but learning to wait is vital. "The ability to hold off, to not have to have something right away, is a building block for when kids eventually do understand money," says Jerlean Daniel, deputy executive director of the National Association for the Education of Young Children.

Learning to wait can be taught even to kids who aren't using money yet. If your child requests a glass of milk while you're sweeping the floor, don't immediately put the broom aside. Explain that you'll get it when you finish. If she requests yet another princess outfit (even though she already has several), suggest that she put it on her birthday "wish list." "Creating opportunities for delayed gratification is one of the best gifts parents can give their children," says Sharon Lechter, coauthor of Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money.

Around age 5, kids can start practicing with money itself. "Start with a short waiting period," advises Laura Busque, Outreach Manager for the Ohio Credit Union League. "For example, help your 5-year-old save up for a Popsicle or piece of candy. Give her a quarter and explain that next week you'll give her another one, and that you can then go out and get the treat." Alternatively, you can have her earn the money by doing an extra chore.

As your child gets older, her capacity for waiting will increase. When your grade-schooler requests a new gadget, tell her that she can't have it right now but she can save up for it if she really wants it, and help her plan how to save the money. You'll probably hear more whining up front, but your child will get a boost of self-esteem when she does manage to get what she wants on her own.

4. Table the taboo.

Some feel it's inappropriate to discuss money with children, but experts say kids benefit from being in on the discussion. Otherwise, they may develop misperceptions like thinking that a debit card never runs out of money or that if you break something, hey, you just go get another one. "You don't have to be afraid to share money concepts with your kids – even if you're having financial challenges," says Lechter. "Think of it as a chance for the whole family to learn new skills together."

Day to day, this can be as simple as talking out loud. "While withdrawing money from the ATM, you could say, 'I put money in the bank earlier, and now I'm getting some of it back out,'" says Philip Heckman, director of youth programs for the Credit Union National Association. "This conveys that money doesn't come out of nothing."

When out shopping, explain your thought process: "If I buy this beautiful tablecloth, I won't be able to pay for gas for the week. Gas is more important than the tablecloth, so I guess I'll have to skip the tablecloth." These kinds of comments show that there are times when the best spending decision is notspending.

But keep things cool and casual, and don't push the point. "Many brief explanations work better than a few, long money lectures," Heckman explains.

5. Be a role model.

What you do will have a much greater effect on your kids than what you say. If you want your child to learn to save, make sure you're saving some money yourself – and that your child knows you do it. If you want her to learn the value of generosity, consider: Are you donating to charity or volunteering your time for a cause?Involve your child in these activities, too.

6. Let them practice.

Learning good money management takes practice. So invest in a little play money (or make some!) for your preschooler so that she can play "store" with you, and consider giving your big kid an allowance.

Piggy banks are a good idea, even for kids who don't have an allowance yet. Your 5-year-old may surprise you by finding a "lucky penny" and immediately dropping it in her bank. Even if she doesn't understand the concept of saving for a goal, she's practicing saving – and that's a great start.

7. Skip the lecture – tell a story instead.

Give a lecture on responsible spending, and you'll get a glassy-eyed stare. But tell a story about a boy who must decide between buying lunch and buying a new action figure, and you'll likely get rapt attention. "When I use stories and music to break down the concepts, the kids really get it," says Renick. Here are some books for 4- to 8-year-olds to get you started:

A Chair for My Mother, Vera B. Williams

Alexander, Who Used to Be Rich Last Sunday, Judith Viorst

Can I Have Some Money? Max Gets It, Candi Sparks

Can I Have Some Money Please? Twyla Prindle

It's a Habit, Sammy Rabbit! Sam X Renick

Lucky the Golden Goose, John Wrenn

Max's Money, Ken Wilson-Max

My Little Penny Book and Bank, Betty Schwartz

My Rows and Piles of Coins, Tololwa M. Mollel

The Berenstain Bears' Trouble with Money, Stan and Jan Berenstain

Will Sammy Ride the World's First Space Coaster? Sam X Renick

Where Is My Money? Twyla Prindle

Kids and Money: What to Expect and When

When will your child understand that money is earned – not waiting in infinite supply at the ATM? And when, oh when, will she realize that she doesn't "need" that glittery tiara in the same sense that she needs a warm jacket? We tapped the fiscal and educational experts to give you some idea about what to expect year to year as your child learns about the world of dollars and cents.

Your 2-year-old

Give a 2-year-old a quarter, and she's as likely to drop it down the air vent as to put it in a piggy bank. She doesn't yet understand that the shiny circles in Mommy's purse are worth more than a jelly bean or a big acorn. "Money is a concrete representation of an abstract idea, and 2-year-olds don't have the representational thought to understand that," explains preschool director Megan Hans.

However, your little one can understand the most concrete definition of money – that "money" means dollars and coins – and she can learn that it's something we use at the store. She may enjoy hearing you say the names of the coins and repeating these words herself. And she probably loves sliding play dollars into a toy cash register or pennies into a piggy bank.

Just never let her handle coins unsupervised – they're one of the biggest choking hazards around. That means keeping your purse out of reach, too, until she's old enough to be trusted not to pop spare change into her mouth.

Your 3-year-old

Some 3-year-olds can begin identifying coins by type – if they've had enough exposure, says Jerlean Daniel, deputy executive director of the National Association for the Education of Young Children.

And as representational thought develops and a child witnesses more cash transactions, she begins to grasp that money has some value. Give your 3-year-old a quarter, and she may understand that she can "buy" a treat – but she may still be bewildered when the cashier doesn't give the quarter back.

Your 4-year-old

Many 4-year-olds can understand the "trade aspect" of money, so they know they won't get a coin back after handing it to a cashier. But give your 4-year-old that quarter, and you may hear her planning to buy a jungle gym with it. Most 4-year-olds can't comprehend the magnitude of price differences. "But they're starting to grasp that a quarter is worth something different than a nickel," says Laura Busque, outreach manager for the Ohio Credit Union League and a former teacher.

Many 4-year-olds can appreciate that money comes from a job and that pay is limited. They can also understand that some people have less money than others and that those with more can help those with less.

Your 5-year-old

At 5, your child will probably begin developing a slightly more realistic idea of money –many parents even start a small allowance around this age.

So if you explain that $10 will buy a set of art supplies, while a quarter will only buy a piece of candy, your child will be more likely to accept this. But it doesn't mean she'll want to save up for those art supplies; she'll probably opt for the candy. Kinder gartners are still very invested in the present moment.

Still, a piggy bank is a good idea, because 5-year-olds can understand that money belongs in a safe place. In one way, your child's focus on the present can work to her benefit; after the quarter clangs into the piggy bank, she may forget all about it.

Your 6-year-old

The concept of "saving up" will make more sense at this age. But because the future is still a murky concept, shorter-term savings goals will be easier to grasp. So hand your budding money manager that quarter, and she might deposit it in her piggy bank for a couple of days, sweet-talk another quarter from Grandpa, and immediately buy a pack of gum.

During the first-grade school year, many children start learning how to count by fives and tens, so they'll be able to add up nickels and dimes. And at 6, your child will likely get the difference between a "want" and a "need," says elementary school teacher Laura Gerrity.

Your 7-year-old

Your child is starting to appreciate that she has choices when it comes to money. Give her a quarter, and you may see the wheels spinning as she weighs putting it into the piggy bank versus popping it into the nearest gumball machine. She's also bound to realize by now that a quarter isn't much to get excited about!

Budding math skills enable many second graders to add combinations of nickels, dimes, and quarters together.

Your 8-year-old

"By age 7 or 8, children will have a good notion of what the real value of a quarter is. They'll know that it's five fives, or 25 ones," says Daniel. So the gift of a quarter may inspire a jaded eye-roll rather than bouncing glee.

But the good news is that your 8-year-old is getting better at "delayed gratification." She also has a better grasp of the future. So longer-term savings goals are much more feasible at this age. If your child has been exposed to the idea that "every little bit counts," she may piggy bank the quarter with a sense of satisfaction that she's a little closer to buying that scooter.

How to spot your Preschooler's hidden Talents

Highlights

Your child loves to sort objects
Your child talks nonstop
Your child fiddles with everything
Your child is a daydreamer
Your child loves to solve puzzles
Your kid is a take-charge type
Your child can't keep still
Your child's talents are still a mystery to you

Some kids' gifts are on display for the world to see. Other children may have hidden talents that masquerade as chattiness, daydreaming, high energy, or even misbehavior.

Below, experts on gifted children tell you how to read the clues to your child's hidden talents and offer advice on how to help her blossom.

Your child loves to sort objects

She pairs up socks, lines up toy cars, or groups items by color, size, or shape. She may also like things to be organized and orderly.

What it may mean: Your child is probably what's known as an auditory sequential learner, meaning she is an analytical thinker, is well organized, and pays attention to details. She may be looking for patterns, often an early indicator of aptitude in math and science, says Linda Powers Leviton, an expert in gifted education.

How to nurture: Explore projects and games that involve patterns and matching, such as beading or Go Fish. Find activities to encourage math skills and experiments to interest a budding scientist.

Put your child in charge of sorting the silverware and organizing the cans in the cupboard. For the collector, hardware stores sell plastic containers with multiple drawers that are perfect for storing small items like shells, rocks, crystals, and whatever else your child wants to count, sort, or classify.

Your child talks nonstop

Your chatty kid may have an advanced vocabulary, concoct elaborate stories, and make few grammatical or pronunciation errors, says Judy Galbraith, author ofYou Know Your Child Is Gifted When… She may also talk very fast and often doesn't stop until she's asleep. She wants to have the last word and may attempt to wear you down with her arguments.

What it may mean: Verbal proficiency can be an early sign of a gifted kid. It's also key to success in school and many other aspects of life. Kids with the gift of persuasion may someday choose professions such as law or journalism.

How to nurture: Encourage your talkative kid by asking her to dictate stories to you that you can then turn into books for the two of you to read. Interview your child and record her thoughts on tape or video.

Along with promoting speaking and writing skills, teach her to be a good listener, too.

Visit the library often and find books that challenge your child. She may prefer books with more words and fewer pictures than other kids her age. Listen to her musings and arguments – but set a time limit if your kid is a tireless debater. And build some quiet time into the day, for everyone's sake.

Your child fiddles with everything

She's compelled to explore how things work – she likes to fiddle with buttons and switches. She may pull something apart and then try to figure out how to put it back together. She enjoys building towers with blocks and is fascinated by machines.

What it may mean: Your child is probably a visual-spatial learner. A child who enjoys tinkering may be a future mechanic, engineer, architect, inventor, or scientist. Or she may design anything from a better mousetrap to a state-of-the-art laptop.

How to nurture: Keep your builder supplied with blocks and other construction toys so she can create, break down, and rebuild her own designs. Encourage her to build with empty cereal and tissue boxes, or whatever else she finds around the house.

Visit play centers or playgrounds designed for hands-on exploration. Satisfy her urge to figure out how things work by giving her safe gizmos to play with, such as padlocks and keys or toys with lots of dials and switches. Point out mechanical objects, such as traffic lights, when you're on a stroll.

Keep close watch over your child, as these are the types of kids who will reach for a power tool or try to learn about an electrical socket by sticking a knife into it.

Your child is a daydreamer

She may seem to be off in her own world communing with the pixies. She may enjoy pretend play, spend free time painting, and have lots of ideas to share. She may use things in new and unusual ways (such as shoveling with a shoe or storing things in it), be open to zany ideas, and think of creative ways to solve problems.

What it may mean: Your little visionary may seem unfocused but probably spends her time dreaming up big ideas. This kind of behavior often indicates a strong creative streak, a telltale sign of giftedness. Everyday life may seem boring to this imaginative thinker, who may escape into fantasy and have a tough time separating what's real from what's not.

Down the road, your child may pursue creative vocations like artist, actor, writer, filmmaker, or fashion or interior designer. Or she may make use of her think-outside-the-box brain and problem-solving skills in innovative ways in the arts or sciences.

How to nurture: Encourage your child's creativity, in whatever form it takes. Provide a budding artist with plenty of materials to stretch her imagination. Play music and sing songs. Experiment with science projects.

Take your child to plays and concerts, listen to her fantastic tales, and provide props (and an audience) for her performances. Take advantage of free "family days" at art museums.

But make it clear when you're open to hearing tall tales and stories – and when you need to know the truth.

Your child loves to solve puzzles

She adores puzzles of any kind – jigsaws, a round of "I Spy," riddles, or a mystery story. When solving jigsaws, she's less likely to use trial and error and more likely to place a piece where it belongs on or near her first attempt.

What it may mean: The puzzle master may be a visual-spatial learner. She's likely to think in images and put her talents to use by taking in the whole picture. Down the track she may make a good detective, archeologist, or research scientist.

How to nurture: Keep the puzzles coming, and don't forget shape sorters and other spatial problem-solving toys. Word games, riddles, and mystery stories are good, too.

Your kid is a take-charge type

Your child has strong opinions about how things should be done. She likes to call the shots with games, dramatic play, and most everything else.

What it may mean: This bossy boots may be a natural-born leader, which will serve her well in school, sports, and many other aspects of life. A take-charge child may inspire others, see conflicts from different perspectives, and bring out the best in a team, says Powers Leviton. In the future? Leadership is especially valued in business, politics, community organizing, and mediation.

How to nurture: Whenever you can, let this child lead the way. She may want you to follow her on the hiking trail. Put her in charge of a project at home, like organizing the shoe rack. Let her arrange things in her room the way she likes (within reason). Ask for her help in solving a family problem: "We're always late for swimming. Can you think of anything that would help us be on time?

Satisfy her need to lead, but make sure she knows you're in charge when it comes to safety and other matters grown-ups need to have the say-so on.

And introduce her to the notion of taking turns, calling the shots, and listening, so she's less likely to alienate playmates.

Your child can't keep still

She likes to do everything on the go – or at least standing up. She enjoys anything where movement is the name of the game.

What it may mean: She's likely what's known as a bodily-kinesthetic or physical learner, who absorbs information and is most engaged when activities involve action and movement.

She may take to sports, dance, or music and may have advanced fine-motor skills. She may gravitate toward jobs that aren't deskbound, such as teacher or park ranger. Or she may use her superior hand skills as a chef.

How to nurture: Make sure each day includes lots of time for physical activity. Movers and shakers can get easily bored, so rotate activities to keep things fresh. These children may also enjoy exploring music through movement, so give them the chance to sing and dance. For those who like to use their hands, bring out drawing, painting, beading, and sculpting projects.

It's equally important for this busy child that you establish soothing bedtime rituals. Try a soothing snack, like milk and whole-grain cereal, an hour or two before it's time to sleep, suggests Galbraith. Then follow with a bath, book, and bed. Listening to relaxing music in the dark can also help your antsy child rest.

Your child's talents are still a mystery to you

If you don't see any of these signs in your child, stay open to teasing out her hidden talents. Chances are you'll spot her special gifts over time.

Asking for feedback from other adults in your child's life can give you fresh insights. Your child's preschool teacher may point out her ability at the craft table. Her childcare provider may comment on her agility on the playground. Or maybe Grandpa notices her love of nature.

By noticing the areas where she has natural talent, you can help her be seen, heard, and understood. But your ultimate goal is to love her for who she is while you help her reach her full potential.