It's too bad children are not taught financial management skills in elementary school. Why? When it comes to money, children are quick studies. By driving our kids down the path to financial independence early, we're giving them a head start towards a loan-free university education, staying out of debt as adults and maybe even retiring early.

Your children are watching
So what are your children learning about money? That all depends on how you treat it yourself. Over 80 per cent of all children are taught financial planning by their family. Do you save faithfully every month, putting aside money in RRSPs, RESPs or other investments? Do your children see you giving to charity? Do you pay the credit card bill every month? In short, how do you handle your money?

Even if you're not a financial wizard, you can still teach your kids sound financial planning. Try to put aside your own financial anxieties and remember that you are the best possible teacher for your child.

What you can do

1. Understand that kids grasp financial principles at different ages. You might be tempted to start teaching your child everything there is to know about money when they're young - and you're not completely incorrect. Kids understand far more than we think they do and it's a good idea to start teaching early to shape their views. Still, it's important to remember that a five year old is usually unable to grasp abstract concepts. Use simple concrete examples instead. Encourage your child to use her piggybank to save money, or drop a quarter in a box for charity. Investing and the concept of compound interest can be explained later.

2. Treat your money with respect. The best way to teach children the value of a dollar is by respecting it yourself. Compare prices while grocery shopping, pick up that penny on the sidewalk and only buy what you can pay for.

3. Connect work to pay. Make sure your children know where your money comes from. If they see you taking money out of an ABM, explain that you work for the money - or you might even want to tell them how many hours you worked to get the money you're holding in your hand.

4. Give an allowance - with conditions. Allowance is one of the best ways to teach children the value of a dollar by helping kids learn how to manage their own money. Gail Vaz-Oxlade, a financial expert and author of The Money Tree Myth, a book about kids and cash, says parents need to set guidelines as to where that money goes. She suggests giving five per cent to charity, 10 per cent into savings (a piggy bank is fine) and the rest can be spent.

5. Give the gift of stocks or mutual funds. Once children are older, give them a gift of mutual funds or stock in a company they have some interest in. (One way to do that is by keeping tabs on the brand names they buy.) There's no better way to explain how investments work than by helping your kids track the market, their investment and watching how the money rises and falls.

Other tips
There are many more ways to teach your kids how to respect money and get them off to a good financial start. Try these:

If you would like to take immediate action by opening a Scotiabank Getting There® Savings Program for Youth account, click here, this account provides an incentive to save and is a great way for young people to learn about day-to-day banking and the benefits of saving. Or to learn more about this account go to Scotiabank.com. 

And, click here to get more information about the Scotia Young Investors Fund. This fund invests primarily in equity securities of medium and large companies around the world that produce goods and services that are directly or indirectly related to and recognized by children or teenagers.