How to Talk to Kids About Money

While most children know how to spend money, few know the virtues of saving it.

But April is Financial Youth Literacy Month, which means it's as good a time as any to start talking to kids about money. Lori Mackey, the "Money Mama" and author of "Money Mama & The Three Little Pigs," a read-aloud book that teaches the basics of sound money management, visited "Good Morning America" to explain how to teach kids about saving and spending.

Mackey said it's never too early to start talking to kids about money.

"It's never too late, but if you can start early, you teach them to give, invest, spend and save wisely, they learn the habits of wealth," she said.

She advised that all children have an allowance so they can understand how money works.

"They make better choices if they are spending their money, and don't become materialistic," Mackey said. "If they want a toy, they have to spend their money. They don't want to waste theirs; you don't want to waste yours, so they don't get a sense of entitlement."

Parents can have children earn money to pay for non-essential expenses.

"Whatever you are spending on your child for things they don't actually need, allow them to earn it. That way it's not costing you any more money, you're just transferring it," Mackey said.

Teach Money Mangagement by Breaking Down Finances

Mackey suggested that parents have kids break down their finances into categories, which teaches kids to live within their means and gives them money concepts and vocabulary.

10 percent: Charitable contributions/giving back

10 percent: Investing (stocks, bonds, mutual funds) in things they use or people they go to so they can own a piece of a company and learn what that means

10 percent: Savings, like a 4 percent return on a savings account

70 percent: Spending

Family money night is another way to make money a topic of discussion.

"Play Life, Monopoly, talk about stocks, bonds, investing. It's a way to talk about their financial goals," Mackey suggested. "Or turn all the lights off and see how the electric bill goes down in a month. Make it fun, teach them how money compounds and grows."

Mackey said to find teaching moments in everyday activities, like when a child's toy breaks.

"They get mad when they buy something and it breaks, and they have used their money on it. So they learn how to make smart buys," she said. "They start to realize that when it's their money -- they realize the value more often. Money is a choice and we want them to make better choices."