Teaching children smart money habits

With the average price of homes exceeding $400,000 in most major cities, the prospect of purchasing a home for first-time buyers can be downright scary. It's just one reason why it's so important to teach children smart spending habits at a young age, helping them understand the value of a dollar. Children who learn good money habits are more likely to keep those habits intact well into adulthood.

Encouraging children at an early age, say around six, to set aside money for future use sets the stage for adulthood. But talk is cheap for these early learners. They need to see their money at work, to understand the merits of saving.

That's where jars come in handy. Label one jar 'Savings', another 'Sharing' and the last one 'Spending'.

Anytime your child earns or receives money should be split three ways among the jars.

For the spending jar, consider putting a specific photo or image of the item for which they want to buy. It'll motivate them better. And talk to them about a plan outlining how long it will take to build up enough money for their goal. For example, "if you save $1 each week for 10 weeks, you will have enough money to buy … " whatever it is they are hoping to buy with their money.

Learning to plan for their purchases may help curb impulse buying and materialist thinking and also teach your child to be patient where money is concerned.

Short-term goals are best to inspire the idea that you have to accumulate before you buy.

Similarly, a young child who is forced to create a savings jar intended for college tuition is expecting too much of them. It's just too far off to visualize and may risk being the jar being raided for a trip to the candy aisle.

Around age 10 it would be worth opening a bank account to teach kids about interest and saving for longer-term goals. In any case, have them write down their financial goals month-to-month, or quarterly.

By the mid-teens, teach your child responsible money management in using a debit card, gift card or credit card with a declining balance.