by Bruce Helmer, President, Wealth Enhancement Group

The key to teaching kids about personal finance is to have them learn by doing. They learn the value of a dollar by doing things for themselves and spending their money how they want on what they want. The choice between a new trinket or baseball now and a coveted doll or game later effectively teaches kids to balance short-and long-term desires. They can learn early that saving for something they really want is worthwhile.

Experience is a good teacher that not all things – toys or treats – are as good as they look on television ads. That's one reason it's good for kids to have some discretionary money. And if it's discretionary, that means you can't veto how your kids spend it. You may want to point out the advantages or disadvantages of spending money a certain way, but if it's their money, let them make the final choice. You may have to grit your teeth as they buy some cheaply made Transmogrifying Reversible Talking Widget that you know will soon be gathering dust. But it's one way that they learn the value of wise buying decisions. If they spend their money and then want something else so badly it tugs at your heartstrings, remind them that they recently decided to buy the Gonzor ShrinkMonster. If they hadn't bought that, they would have enough to buy the Kiss-a-bye Baby.

It's important to reinforce the value and consequences of spending and saving decisions, but it's probably wisest to do it as a statement of fact. The point is not to make children feel stupid for buying something you didn't want them to – even if, in fact, it seemed stupid to you. Rather you want to be sure that they understand they made a choice and they have to live with it.

For almost all of us, our financial lives require constant "either-or" decisions. If you don't face those decisions daily, you either have more money than you can keep track of, are very deeply in debt, or are a candidate for sainthood. Kids can learn to address the "either-or" spending and saving dilemma with your gentle guidance. It's a lesson that applies to money – and to most other areas of our lives. It comes down to valuing our resources, whether that means money, time, or even trust. Actions always have consequences.