Want to raise financially healthy kids? Here’s what to do — and mistakes to avoid

You want your kids to have a healthy financial life, yet knowing how to help make that happen may leave you stumped.

It may be especially hard if you have your own money struggles. Yet teaching them as early as possible can make a difference.

“There’s a lot of misinformation out there that they will be exposed to later,” said Sheila Bair, former chair of the Federal Deposit Insurance Corporation, an independent agency that insures U.S. banks.

She’s also an author of children’s books that focus on money lessons. Her latest were released this week — “Billy the Borrowing Blue-Footed Booby” and “Princess Persephone Loses the Castle.”

Here’s how to help get your children on the right path, and what to watch out for.

Children learn from observing their parents. Yet many people are setting bad examples when it comes to money, said Bair, a member of the CNBC Invest in You Financial Wellness Council.

“A lot of adults do not always manage money as well as they should,” she said.

For instance if you buy something that is away above your means or impulse shop while out with your child, they’ll see it.

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If you are stressed over money, acknowledge it. It may be stopping you from passing on healthy behaviors to your child, added Melanie Mortimer, president of the Securities Industry and Financial Markets Association Foundation. The organization is the investor and financial educator arm of SIFMA, a trade group representing securities firms, asset management companies and banks.

“It is one of the least recognized barriers to better financial literacy in this country,” she said.

“Getting comfortable is really important, and disassociating your own bills and debts with the need for educating your child, I think is critical.”

Talking with your kids about money is important, but how you do it is also crucial.

“Don’t be didactic, don’t be finger wagging,” Bair said.

Instead, have conversations around the dinner table about things like savings and budgeting. With younger children, stick with simple concepts and as they get older, delve into things like the rewards of earning an allowance or ideas to make money.

When you go shopping, let them see you pay for items and even comparison shop.

If you use a credit card, be sure to explain how it works.

“It doesn’t really resonate that mom and dad are spending with that card, but there is their hard earned money behind that card that’s going to actually pay for whatever the purchase is,” Bair said.

Books are also a great way to teach children about money in a fun and engaging way, as are board and online games that introduce money lessons — such as Pay Day or Monopoly.

There are also a number of online resources that have games, activities and worksheets for kids, such as the Council for Economic Education’s Family-At-Home Financial Fun Pack and the National Endowment for Financial Education.

By the age of 9, children are usually beginning to use fractions and percentages. That makes it a good time to start teaching them about investing, Mortimer said.

The SIFMA Foundation’s stock market game is used in schools and through community organizations, and is also available to individuals on its website.

It’s a great way to learn valuable skills that will allow you to make informed decisions — yet not lose any money, Mortimer said.

“Experiential learning is one of the best ways to capture the hearts and minds of young people, and also to deeply embed lessons and knowledge in them so that when they are making their choices and decisions, they have that sort of instinct to fall back on,” she said.

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