Devoted to understanding the basics and fundamentals of investing

While I don't have children, I think buying well-known (but solid) companies that children recognize could be a fun exercise and expose them directly to the stock market. Perhaps the biggest reason being there is no minimum to invest, unlike most mutual funds.

Larry,

I ran across a good article at The Coin Jar.

Start young
It depends on the child, but kids who haven't even begun kindergarten yet can begin to understand the basic concepts of money. If your child is nagging you for a couple quarters to buy a toy from the grocery store vending machine, he already knows how money works. Instead of pulling the coins from your pocket each time, get your child a piggy bank and encourage him to make deposits regularly. Then have him take a little money out before you head out shopping.

Think EGSS
Teach the four basic components of money: Earning, Giving, Saving, Spending.

As your kids get a little older, give them some age-appropriate chores or responsibilities around the house to earn pocket money for items as small as candy or chewing gum to as big as CD/DVDs. Instead of just putting their money into a basic piggy bank, though, get them in the habit of splitting their earnings into three "accounts"--for spending, saving, and giving.

The spending account is for their everyday "necessities," like the items mentioned above. The saving account is for bigger items that take a little time to build up the money for, like a video game or skateboard.

The giving account can be used for birthday gifts and the like. But also encourage your kids to think "outside the box" with their giving. Point out that they can also give to their church or to a children's ministry, or even to a friend in need.

Practice what you preach
Of course, the biggest way your kids will learn about how to manage their money is from watching your own habits--good or bad. If financial stress is your standard way of life, you can still teach your kids effective money management skills--just start learning the basics and put the skills into practice in your own life as you teach them. There is no age-limit on financial education.

Negative reinforcement shock therapy has also proven to be an effective motivation to some, but shouldn't our children ever be given the opportunity to fail financially? Failure can be a great learning experience.

Thanks for the excellent comments. I agree with both of them. As parents we may want to think of ourselves as catestrophic insurance. Let the kids make minor mistakes that will teach valuable lessons but keep them from ruining their life if they will let us.

I had a boss at Chase that often stated that he wished every officer could have a small loan loss early in their career. It seared lessons that kept them from disasters later in their careers when they controlled much larger amounts of money.