Our kids are still really young (6, 4, and 2), but we’re talking with them about money more and more, at least the older two.  This weekend, with a little coaching, they struck a hard bargain at a neighborhood garage sale, scoring new toy airplanes for 25 cents each.  How often do you talk with your kids about money?

Lowe’s Build and Grow Clinics, held Saturday mornings at 10:00, are for “recommended” for first- through fifth-graders.  A wooden project kit, goggles, and apron are free for the first 50 to register and show up at the appointed time. Upcoming projects include a catapult and a racecar.  The site lists workshops this weekend and next weekend.

Home Depot also offers free workshops for kids age five to twelve on the first Saturday of each month.  At the June workshop, kids will build a wooden soccer game.  In addition to the kit, kids also receive a free apron and achievement pin.

Have you and your kids participated in a past workshop?  If so, what did you think?  Do you know of any other stores that offer free activities for kids?

A Roth IRA offers numerous opportunities to teach your kids about investing as they track the performance of their investments and get hands-on lessons about compound interest.  Plus, money in a Roth IRA may be used to help pay for college, a down payment on a home, and of course, their retirement, although that’s probably a vague concept at this stage of life.

I realize your kids may not jump for joy at the suggestion of investing some of their summer earnings, so consider rewarding their efforts.  Just as many employers match a portion of employee contributions to a 401(k) plan, you could offer some sort of match as well.  Just keep in mind that the total amount contributed cannot exceed the total the child earned in a year up to $5,000.

Your child can open a Roth IRA with $1,000 at Vanguard.  At Fidelity, he or she can open an IRA with just $200, but they’ll have to continue contributing $200 every month.  At Charles Schwab, they can open an account with no initial deposit as long as they automatically deposit $100 per month.

Are there any companies you know of where you can open a Roth IRA for a one-time deposit of less than $1,000?

Even though my parents were both teachers, they had rarely given us any overt lessons about saving, investing, or avoiding credit card debt, so the topic caught me off guard.  What would she say?  Was she worried that I might mismanage it, as I had an inheritance I received from an uncle 15 years earlier?  Would she implore me to save most of it?  To invest it conservatively?  No.  She surprised me with the encouragement to make sure to use a portion to buy something just for fun.

It’s possible that my mom was feeling some regret over not spending more on herself. Both of my parents were always very conservative in their use of money. But she also knew that the financial crash and burn I went through had made me very cautious in my use of money.  Maybe she thought I had swung too far to the frugal side and wanted to remind me that it’s okay to spend some money just for fun.  Of all the final financial advice one could give, making sure we use some money just for fun isn’t bad.

It took me a few years to follow my mom’s advice, but I finally did buy something just for fun–a nice digital camera.  I get a lot of pleasure from pictures.  They help me relive great vacations my wife and I took early in our marriage, marvel at how much our kids have changed, and think back on special times with friends.  As an added bonus, when I use that camera to capture a memory, it very often brings back fond memories of my mom.

What great financial advice, either by word or example, did you get from your mom?

Who knew that having our kids take out the trash today may help them avoid trashing their finances down the road?

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My take?  I’m all in favor of teaching kids how to save energy, but I’m not crazy about the idea of paying them to do so.  We try to turn daily activities into learning activities, reminding our kids that we have to pay for things like water.  They’re learning that if they remember to turn the water all the way off after washing their hands, we’ll have more money for a vacation and other things.

A good web site that will help your kids learn how to save energy is Energy Star Kids.  What do you do to help your kids learn about conserving energy?

Of course, the best way to take advantage of the power of compound interest is to begin investing when you are young.  However, for young people that can feel like an impossible time to begin investing.  Incomes are low, the costs of starting one’s adult life are high, and besides, retirement is just some vague concept set far in the future.  There will be time to get to that later.

Maybe all that’s missing among the young is a little bit of financial knowledge.  Here are two financial insights I wish someone had shared with me when I was younger.

First, learn the benefits of getting started early and the penalties for waiting.  Use an online calculator to estimate the results of starting to invest at various ages.  For example, if you invest $200 a month starting at age 20, earn an average of 7 percent interest per year, and do that until age 70, you will end up with over $1 million dollars.  Wait until age 25 to get started and you’ll end up with about $300,000 less.  Hold off until you’re 30 and you’ll lose out on $500,000.

Here’s another eye-opening illustration.  Person A invests 200 per month starting at age 20 and then stops investing after 10 years.  Person B waits until age 30 to begin investing $200 per month and continues doing so for the next 40 years.  Person A invests a total of $24,000.  Person B invests a total of $96,000.  Assuming a 7 percent annual return, at age 70 person A ends up with $550,000 while person B ends up with $500,000.

Now here’s the second insight: As early as possible get in the habit of prioritizing your use of money properly.  There are only five things you can do with money once you have some.  You can spend it, use it for debt payments, save it, invest it, or give it away.  And that’s the order encouraged by our culture: use it for lifestyle spending first (where to live, what to drive, where to vacation), make the monthly debt payments that always seem to come with a lifestyle-first life, save and invest if there’s anything left over, and then maybe throw a few bucks toward charity.

The far better order is to be generous with the first portion of any money received, save or invest the next portion, and then build your lifestyle on what remains.

What about debt?  Never carry a balance on your credit cards, don’t finance vehicles, and if you have education debt pay more than the minimum so that you can wipe out that debt as soon as possible.  When you buy a house, take out a mortgage that requires no more than 25 percent of your gross monthly income for the combination of your mortgage, property taxes, and homeowner’s insurance (if you live in a high housing cost state, you may need to go as high as 30 percent).

With these two insights, youth need not be wasted on the young.  If you’re in your 20s, are you putting these ideas into practice?  If you’re older, what other financial lessons do you wish you had learned when you were younger?

Among the many noteworthy findings in the Kaiser study:

• Most young people are under no parental rules as to how much time they can spend using entertainment media.  Just 28% have rules about how much television they can watch, 30% have video game restrictions, and 36% have limits on how much time they can spend using a computer.
• Nearly two-thirds of young people say the television is on during most meals in their homes, and nearly half say it is on “most of the time,” even if no one is watching it.
• Some 71% of young people have a television in their bedroom.
• There has been a significant increase in ownership of mobile media devices among young people.  Today, 76% of 8- to 18-year olds own an MP3 player (61% of 8- to 10-year-olds), and 66% own a cell phone (31% of 8- to 10-year-olds).

If you want to teach your children how to use money wisely, Sociologist Juliet Schor says it’s a mistake to give marketers direct access to your kids via televisions in their bedrooms and no restrictions on their use of entertainment media.  She was one of the first to highlight the trend of parents being decreasingly involved in what media their kids take in and how much.  She blames that trend, in part, for increases in materialism, anxiety, and depression among today’s youth.

We have three kids, the oldest of which is six.  We definitely limit how much time they spend watching TV or using the computer.  Our television is on maybe an average of an hour a day.  It probably helps that it’s an older TV and we do not have cable, which limits the appeal.

If you have kids, what restrictions have you placed on their use of media?

The APA recommends that parents look for signs of stress in their children such as sleep or appetite changes, nightmares, or avoidance of situations or people.  It also recommends age-appropriate communication. Adolescents may be able to handle more details of their family’s situation, whereas younger children may perceive situations to be worse than they are and mostly need reassurance that their family is going to be okay.

Tough economic times can provide great opportunities to teach children about budgeting, using coupons, making trade-offs, and more.  One of my favorite resources for teaching age-appropriate lessons about money is this document from the National Endowment for Financial Education.