The Lesson: Everyone needs to think before spending.
Introduce money words and ideas to your child by age 4 or 5. Explain that a "check" is a written instruction telling the bank to take money from your account and send it to the person or store whose name you've written on it; you get a "discount" when the regular price of a product is reduced; and a "budget" helps you plan to pay for things that you need, like food, clothing, and gas. Let her know that when there's cash left over you can spend it on "wants," like going to the movies.
Make a shopping list together.
If your child can't write words, have her scribble or draw pictures of things you need to buy. When you're done, ask which items are needs and which are wants. You might ask, "Do we need milk? What about cookies?"
Give your child choices.
When you're shopping with your preschooler, let him pick out one special treat. With a slightly older child, you can broaden the options. You might give him $4 to spend in the grocery store as he pleases (though you should retain your veto power). Don't cave if he goes over the budget and pleads for an extra dollar. "You need to set limits, or your child will think there's an endless supply of money," says Dungan.
Share shopping strategies.
If you're buying a new TV, let your child know that you're willing to spend more for a model with a sharper picture. But mention that you buy, say, generic yogurt because it costs less than the name brand and you like the taste. Your child will also learn from the times you decide not to buy something. "If you say, 'I'll wait until it's on sale,' you're modeling a positive way to control your impulses and make smart decisions," notes Jon Gallo, who cowrote The Financially Intelligent Parent.