7 tips for teaching your kids how to be smart with money

NEW YORK (WABC) -- There are plenty of great ways to teach your kids about money, like allowance.

But what do they get it for? Should it be tied to chores? And how do you get kids to learn to save?

Let's get smart about money.

Tip 1: Give a small allowance, but not tied to chores.

"Chores are member of the household responsibilities," said David Sparrow of Parents Magazine. "So, you do the dishes? You don't get paid for doing that. If your child clears the table, they don't paid for doing that. They get an allowance to help them learn about managing their money."

Tip 2: Sparrow advises, kids can make extra money doing extra work.

"I am a big fan of emptying the dishwasher, putting away the utensils," said one mother, adding that she gives two dollars for that.

"And do you save it or spend it?", we asked her daughter. "Save it," she said.

Tip 3: Take your kids to work.

My 6-year old son says, "Mom, I see you go to work and you work so hard but I never see you come home with money." And I tell him, money can come in different forms.

"It's an interesting point, because everybody's got direct deposit now, money is going straight into your 401K if you're doing it the right way," said Sparrow. "But kids really don't have a sense, money doesn't have that feel of being real to kids."

Tip 4: On vacation, give kids maybe $5 or 10 to spend, but not more.

"And you know what, don't pay for the tax either. If an item is $9.99 plus tax, they're not going to be able to afford it," said Sparrow.

One mom says let them feel the pain and pleasure. "If you meet him halfway, if he looks for something and knows how much it is, he'll look at his piggy bank and see how much he has, and we'll split the price with him," she said.

"Let's say they want the fancy jeans that you don't want to spend the money for?" we asked one dad.

"On the $200 jeans, we'll make them cash in a couple of gifts for it," he said.

Tip 5: Explain shopping strategies, like using promo codes, coupons or buying generic.

Tip 6: Open the 'Bank of Mom and Dad". The low rate at the bank won't teach much.

"If your child wants to save $5, you can pay 20% interest over the course of the year, and that way your child can really see their money growing," said Sparrow.

Tip 7: Encourage small business and investing.

Let's say your kids want to run a lemonade stand. Make them dip into their piggy bank and buy all the stuff necessary for their small business, the lemons and lemonade, cups, poster boards and markers to write their signs. Only then will they understand the costs of starting a business, and profit.

Even buy a stock.

"Like one share in a stock, say Disney or a stock that they are particularly attracted to, it could be American Girl, Nike," said Sparrow.

Good luck, families, and parents, don't be so hard on yourselves! "Advice on how to make your kids smart with money?", we asked one mom. "I am the wrong parent for that question, I spend way too much," she said.
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