Money and finances intertwine all areas of our lives, yet we routinely hear how ill-prepared young adults are to make wise money decisions. Parents naturally want to prepare their children to face the realities of today's complex and confusing world, so how do you go about teaching your children or grandchildren about money?

Before you start thinking of ideas for your children, take a step backward and reflect on your own life. What are your earliest memories of money and finances? Was it ever discussed in your family? Was it a source of friction or argument? How has it impacted your current thinking? Are you nervous or confident when making financial decisions? What are your own fears or dreams about money? What hard-earned experiences about money do you wish to impart to your children?

Perspective
The most important lesson to convey to young people is the right perspective about money. It is a great servant, but a lousy master. It can't buy happiness, but people often act otherwise. It is not evil, but the love of it is the root of all kinds of evil. The accumulation of wealth as a by-product of a full and complete life is fine - but a life focused on accumulation just for the sake of accumulation is ultimately unfulfilling. On the other hand, pursuing poverty through unwise life choices, a lack of education or poor money management skills is not a worthy goal either.

Patience
No one likes delayed gratification - least of all young people. Waiting for anything is a foreign concept. In fact, it's foreign to a lot of big people too. How do you enlighten a young person about the importance of patience? When my son was small and wanted to add the latest techno-gadget to his arsenal, I explained how saving his money instead of wasting it on a purchase would allow it to grow over the years to a vast sum by the time he retired. He dutifully nodded in agreement and then searched for another angle to convince me the gadget was not really a purchase, but an investment in his technology education. Clever boy.

You Decide
When our children were small, we vacationed at Disney World. We gave both kids some cash and told them it was for any drinks, food, or gifts they might want to buy while we were there. My son went through his cash within hours, enjoying every penny of it. My daughter drank from the water fountain and starved herself before ultimately becoming a banker and loaning money to her brother. Clever girl.

Piggy Banks & Allowances
When a child receives an allowance and is responsible for using the money for certain personal expenses, it teaches basic budget skills. Whether you use a piggy bank or open a savings account for them, it also teaches them the value of setting aside a portion of today's money for a future use. We actually used several piggy banks with our kids, allocating cash among expenses, short-term savings, and long-term savings.

Tell Me a Story
We all love stories, especially children. They want to hear about their family's history, struggles, failures and triumphs with finances or other areas. Some of the wisest parents I've known were ever-watchful for teaching moments, when they could use a story to illustrate an important point. Children don't like being lectured to (who does?), but they will give their complete attention to a good story.

Show, Don't Tell
Perhaps the most important lesson about money that we convey to our children is non-verbal. They watch how we live our lives, the decisions we wrestle with, and the choices we make. Our actions scream at them louder than anything we could possibly say.

For more information and some ideas about teaching your children about money, check out these Web sites:
www.SchwabMoneyWise.com
www.jumpstart.org
www.360financialliteracy.org
www.learntosave.com

Gerald A. Townsend, CPA/PFS, CFP^®, CFA^® is president of Townsend Asset Managment Corp., a registered investment advisory firm. Email: Gerald@AssetMgr.com

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