By David Bakke, moneycrashers.com

David Bakke is a financial writer for Money Crashers, where he discusses tips for saving money and personal finance education, particularly for young children.

Given how critical currency is to people's well-being and future success, our public education system – and private, for that matter – is woefully remiss regarding teaching kids about money.

The truth is those lessons need to come from family. And as an aunt – someone who loves the kids but is just a beat away from the parents' vested interests – you can have a profound effect on your nieces and nephews concerning their personal finance lessons. So, any contribution you can offer up will be uniquely helpful.

Here are some tips to pave the way:

1. Get Down to Their Level
For just about any important conversation, speaking to a child on his or her own level is a great way to get your point across. It avoids the mightier-than-thou dynamic kids experience when someone drones on from above.

Instead, sit cross-legged on the floor with them, or sit in a chair beside them, so you can chat with them eye-to-eye. This conveys the message that you care and are hearing what they say – and it's a good way to ensure that your words sink in.

2. Use Personal Examples
Most kids learn best when they can see examples rather than just hear a lecture. If you're approaching them on something important, be prepared to share some of your own experiences. Perhaps you had some years of irresponsible borrowing or have been dinged by a spate of late payments. Now is the time to fess up, so they know you're not preaching but teaching.

Bring along some credit card statements. If you pay your balances in full, point out how you avoid interest altogether. If you're paying significant interest, show them that as well. Explain that this is a punishment from the bank because you didn't pay back your balance. Who knows? You may even become more motivated to lop off those balances yourself as a result of doing this.

3. Take Advantage of Real-World Opportunities
If you don't get to see your nieces and nephews often (or even if you do), one event likely to be part of your next visit is a trip to the toy store. Aunts tend to be especially doting with the kids in their lives, but you need to be careful.

Explain to them how you differentiate between needs and wants and how even if you deprive yourself sometimes, you actually feel better because you've improved your bottom line. If you typically give the kids cash, have them establish a spending limit. Tell them they're more than welcome to spend the whole thing, or they could spend less and save the difference for a future visit. Or better yet, suggest they implement the “three jars method:” spending, saving, and sharing.

If you're using a credit card, explain how the rewards system works (before you pay that balance in full). In this way, they can see that cards don't always "take;" and if credit cards are used wisely, sometimes they give back.

4. Teach Them to Earn Their Own Money
Depending upon their age, there are lots of ways you can teach kids to make money – including various small business ideas for teens and kids. Explain how amazing it feels to have some cash socked away. Help them sell their unused toys online. Older kids can cut the grass, shovel snow, rake leaves, or babysit; and nieces and nephews of just about any age can set up old-fashioned lemonade stands. Any of these ideas will create a sense of independence and show them that cash really is king.

Final Thoughts
You're imparting life lessons here, to be sure, but do your best not to step on the toes of the parents. Even well-meaning aunts can come across as obtrusive and nosy if they're not careful about their approach. Your best bet is to consult with the grownups first, and figure out whether they're open to your input. More than likely, they'll agree that it takes a village.

How else can you teach your nieces and nephews about money?

Photo: Sura Nualpradid
Published: October 1, 2012