5 Tips for Raising Money-Smart Kids

April is "Financial Literacy Month," which makes it an opportune time to shine a spotlight on the importance of economic and financial education for your kids .

A recent study from the National Foundation for Credit Counseling found that 40 percent of adults gave themselves a grade of C, D, or F on their knowledge of personal finance, and 78 percent agree that they could benefit from additional advice and answers to everyday financial questions.

Given that financial literacy is the basis of successful retirement planning and long-term security, these statistics paint a bleak picture for many Americans.

One of the key ways to reverse the trend with adults is to arm young people with the tools to make smart financial decisions. Research shows that lack of knowledge on personal financial matters can plague youth well into the future. Fortunately, many schools recognize the value of providing students with a strong foundation in financial literacy. According to Working in Support of Education (w!se), a Voya Financial partner, schools in 43 states participate in their financial literacy program and are teaching these skills alongside their core curriculum.

While teaching financial literacy in our schools is a great step toward preparing future generations to take control of their finances, it's never too early for parents and caregivers to teach kids about money and set them up for financial success. A report issued by the University of Cambridge revealed that kids' money habits are formed by age 7. Adults have a great opportunity to shift the paradigm by introducing kids early to financial basics. Here are several ways to teach kids financial fundamentals that will put them on a path for future success:

1. Lead by example
You have a great deal of influence on your children, and they tend to mimic your actions. Instill good money habits by limiting the amount of shopping trips as leisure activities, using coupons at the grocery store and comparing similar products to demonstrate how cost factors into your decision process . Show your child that, because you saved, you can purchase something special that you would not have been able to purchase otherwise, or save it for an ever bigger purchase in the future.

2. Teach saving, giving and spending wisely
Children should learn at an early age that all money should not go into one big spending pot. Use three labeled mason jars to separate money—one for saving, one for spending and one for donating. Any time your child earns money by doing chores or receives a cash gift, encourage him to divide the cash equally among the jars. He'll learn how to manage his money as well as the value of giving back .

3. Take it to the bank
Many banks allow you to open a savings account with low minimum deposits. A study by the University of Kansas found that children who have early access to savings accounts accumulate more assets—an average of $2,000 compared to $100 for those who did not have a savings account as a child—and are four times more likely to invest in stocks as adults. Opening a savings account for your child also will teach her that money can earn interest, and those earnings, in turn, generate more interest.

4. Test the stock market waters
Don't start off by trying to explain complicated Wall Street concepts, but let your child know that investing is about attempting to make money grow to meet long-term financial goals, like buying a car or house, paying for college or preparing for retirement. Your child can select two or three stocks and track their performance, without you even having to put money on the line. Or, if your child wants to put some skin in the game, help her select and purchase stock in a company she likes or admires. Tracking stock performance will give your child a sense of the ups and downs of the market. While she may not make a fortune, the experience of gaining and losing money is just as important. (It's also important to remember that investments are not guaranteed and are subject to investment risk, including the possible loss of principal. The investment return and principal value of the security will fluctuate so that when redeemed, may be worth more or less than the original investment. Generally, the greater an investment's possible reward over time, the greater its level of price volatility, or risk.)

5. Let them make mistakes
Do you give your children an allowance or allow them to earn money for extra chores around the house ? Giving them small amounts of money provides them with a great opportunity to manage it. If they make the wrong choice, they'll experience the negative consequences of their mistake and will learn to make smarter financial decisions in the future.

Talking with your kids now and implementing these techniques at a young age will set them up for a brighter financial future. At the same time, as you share these lessons, you might find yourself becoming better educated on these topics and then able to give yourself an A or B on your knowledge of personal finance.