As parents we are often faced with the difficult decisions that could have lasting effects in our child's life. Many times we are forced to make choices without really knowing the potential fallout if we choose the wrong path. Do the benefits of childhood immunizations outweigh the risks? Are children that go to daycare more well rounded than children that stay at home with a parent? Will going back to work cause irreparable damage to my child? These questions and hundreds of other like them cause parents to second guess themselves on occasion. Fortunately there is one area of child rearing that most of us can agree on, and that is the absolute necessity of how to teach children to be financially savvy.

Financial literacy like other fundamental life lessons must begin at home. The following tips can help parents raise their children with the tools to avoid common financial missteps that can limit their standard of living as an adult.

Lead By Example

We have all heard the saying “do as I say, not as I do.” However in reality children learn what they live. If you do not have control over your own finances you will have a difficult time teaching your child how to properly handle money. Educate yourself on the basic principles of personal finance and implement those lessons in your household. This will not only improve your own situation but also set the groundwork for how your child views money.

Teach The Value Of A Dollar

You can begin teaching children at a young age the value of a dollar. It is important for children to see and understand the difference between “getting” things and “paying” for things. Naturally you will want to have age appropriate discussions to avoid overwhelming smaller children, but you should not shy away from answering questions or explaining that in order to acquire something you have to pay for it first.

Work Ethics

Developing a work ethic is one of the most important things for a child to learn in order to grow up to be a self-sufficient, responsible and ultimately happy adult. Children learn important lessons about working with others, decision making skills, prioritizing tasks and recognizing when they have failed or accomplished a goal. Clearly the monetary compensation for work performed is the driving motivator for most of us — young and old alike — but the feeling of a job well done can improve self esteem and teach other important values.

Lessons In Money Management

When children are old enough to understand the dynamics of money even in basic terms, you can begin talking to your child about the importance of good money management habits. These lessons do not have to be “sit down” classroom style discussions. In fact sharing tips with your child during day to day activities may leave a bigger impression. Your kids see you using money (or credit) every day giving you ample opportunities to open a dialogue about money. Do not avoid including your kids in conversations about bills, debt, saving or even investments.

Obviously as your child grows into a teen and young adult, the lessons will change and become more complex. As they begin considering college, your discussion can lead into that of how to pay for college, private student loans, federal student loans, or other sources - and then how to manage those choices after college.

By creating a foundation on which to build your financial lessons the transition from piggy bank to 401(k) will be less of leap for your child. While it is true that there is more to life than money, raising financially literate children improves the chances that your child will live comfortably and enable them to enjoy the other things in life.