With the cost of living on the rise, parents have become more aware of the need to raise financially savvy kids. Good money skills, however, don’t come naturally. To teach your children financial literacy, consider these 10 tips:

• Lay a foundation. Begin teaching your child financial literacy early on through everyday conversations and choices at the grocery store: “If we buy this cereal, we can’t buy those cookies.” This puts it at his level and plants seeds for financial responsibility.

• Make allowances. An allowance can teach your child how to earn, save and become a wise consumer. First explore your philosophy regarding an allowance: “What will be required of my child? What will the money be used for? And how much will I give?” Then decide how often you will pay.

• Brand a business. Encourage your child to get involved in a business venture. This can be as simple as shoveling driveways for neighbors or as elaborate as starting a pet-care business. If you own a business, find ways to get your child involved in that, too.

• Establish expectations. Once your child begins to acquire funds, create guidelines for how the money is to be allocated, such as the one-third principle: One-third goes to savings, one-third for charity and one-third for spending. As your child matures, consider adding a fourth category for investing.

• Set up savings. Open a bank savings account for your child and provide tangible experiences so he learns about the banking process. Rather than using online banking or drive-through services, have him accompany you to the building, fill out the deposit slip and hand it to the teller. Teach him how to make adjustments to his bank register and read statements for interest earned on his account.

• Investment opportunities. As your child shows an interest, encourage him to buy stocks in companies that produce products or services he uses or is familiar with. Have him track their progress too.

• Set sizable spending goals. Help your child create spending goals for larger purchases by writing down what he wants to buy and putting a picture of the item in a visible location. Then help him devise a plan: “How much do I need to save to purchase this item? How long will it take to save for it?”

• Communicate competent consumer skills. Teach your child to make informed choices by exploring all the options: “Can I find this item on sale?” “Does it need to be new?” “What other things could I buy with this money?” Also talk about the reality of marketing: “Will this item make me as happy as the children seem on TV?” Discuss delayed gratification, too. If an item costs more than five dollars, encourage him to think about it several days before making the purchase. But let him make the final decision, as even foolish spending will teach him to be a wise consumer.

• Provide a parallel on plastic. A good way to introduce the concept of credit and debit cards is through prepaid bankcards or gift cards as they provide a finite amount of money, but give children liberty to make spending choices over time. Have your child keep track of these balances and put a label on the back of the card.

• Foster philanthropic giving. Encourage your child to give a portion of his earnings to help those less fortunate, as this teaches compassion and civic responsibility. Don’t dictate where or how much he must give. Let him choose the organization. Remind him that philanthropy encompasses giving of our time, too.

Finally, be a good role model. Talk with your child openly about money and let him help with family finances by shopping for sales, clipping coupons, comparing prices and checking receipts to make sure you received advertised discounts. Let him see you modeling these and other financially responsible behaviors, too.

Books for Your Money!

• “A Chair for My Mother” by Vera Williams
• “Beatrice’s Goat” by Page McBrier
• “Dollars and Cents for Kids” by Janet Bossner
• “The Everything Kids’ Money Book” by Diane Mayr
• “Less than Zero” by Stuart Murphy
• “The Pickle Patch Bathtub” by Frances Kennedy
• “Rock, Brock, and the Saving Shock” by Sheila Bair
• “Something Special for Me” by Vera Williams

Gravy Train Websites!

• consumerjungle.org
• economist.com/markets/bigmac/Index.cfm
• fdic.gov/about/learn/learning/index.html
• jumpstartcoalition.org
• stockmarketgame.org
• usmint.gov/kids/flashIndex.cfm