6. Teach them about compound interest. Saving money is a smart way to learn the algebraic lesson of compound interest. Money grows over time in a savings account, for example, and can be a good motivator to save. If you really want your children to see their money grow, have them invest in a mutual fund that should increase in value faster than a savings account. Warn them that mutual funds can drop in value, and go to your broker's website to show them graphs of how mutual funds you own have done over the years. Remind them that their money is in a long race, not a short one.
7. Opportunity cost lessons. When grocery shopping, show your kids the value of price comparison and how not spending as much on something can save you money for something else. "At the grocery store, you could show them how you're choosing store brands or generic products over brand names. Make a game out of it, showing them how much you can save in total," says Ray Advani of Chicago, whose blog tiethemoneyknot.com focuses on money and relationships.
8. Play games. Board games such as Monopoly and The Game of Life can teach kids how to spend and earn money, but they don't do a good job of teaching them to be savers. Instead, try online games such as Save!, a free downloadable game from Mass Mutual Financial Group that can teach them how to separate wants from needs when it comes to spending. The game leads players through a 3D fantasy world where they collect virtual money while trying to avoid impulse buys called "iWannas," more likely known to your children as candy, soda and toys.
9. Go to the bank. If you have elementary-aged children, bringing them to the bank can be a fun learning experience, says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. Let them help you at the bank and explain what you're doing and why. "Let them pour coins into the coin counter and exchange it for cash or ask them to double-count the bills the teller hands you," de Baca says.
10. Invest. Setting up a mutual fund or savings account can help your child learn to be a saver, but a stock investment can teach them a little more. Pick a company they're interested in or a product they use a lot – such as Disney, Facebook, Apple or even your bank – and see if a dividend reinvestment plan is available to buy them a few shares. Investing in a DRIP can help them learn to research stocks and save more money by having the dividends reinvested for them back into the company.
Probably the best way to teach your kids how to be savers is to lead by example. Put money aside each month in a savings account to pay for a trip, for example, and explain to your children why you're doing this.
Eventually, a child's personality traits that may make them a spender or penny-pincher will shine through. But "with some guidance at an early age, you can help them understand financial responsibility and learn their own strengths and weaknesses when it comes to money choices," de Baca says.