The other big talk: The financial facts of life

With the economy making headline news day after day, here's never been a better time to talk to your kids about money. Here are some points to bear in mind as you sit down to have the other big talk with your kids.

• Help your child to understand the difference between wanting something and needing something. Encourage your child to get in the habit of creating a list of things she'd like to have (but doesn't need). If she waits a few weeks, she may find that some of those items no longer have the same appeal (and she may be relieved that she didn't buy them on impluse at the time).
• Teach your child to save in advance rather than requesting an advance against his allowance and paying you back after the fact. That way, he'll learn that if something is really worth having, it's worth saving for. Besides, in the real world, he'll have to pay interest for the privilege of borrowing money.
• Encourage your child to invest some of her money in making the world a better place. She's more likely to get hit with the spirit of giving if you help her to identify a cause she believes in - perhaps an environmental organization or a charity that is working to improve the lives of children around the world.
• Have a frank discussion about some of the money mistakes you've made over the years. Experience is one of the greatest teachers, remember? And kids love hearing tales about times when their parents messed up. (It helps to prove that moms and dads are human, too.)  So let your child know about the time you invested your $3 in a back-of-the-comic book offer and were terribly disillusioned by what you received in the mail. Or about the time you lent $40 to a so-called friend in high school, who never did pay you back. (Hey! Maybe you can track down your $40 - plus interest - via Facebook.)
• And speaking of tough lessons learned via the School of Hard Knocks, don't be afraid to let your child learn a few of those money lessons for himself.  If he's determined to blow a month's allowance on an mp3 player that looks like a cereal box toy, voice your concerns, but let him make the final decision. He'll be much more discerning about quality in future.
• Make sure your child understands what money can't do.  Money isn't magical.  It can't solve all your problems or make you happy.  It's simply a tool that allows you to buy or sell goods. And, as such, you need to maintain control over money (as opposed to letting money rule you). Otherwise it will take over your life.

How do you handle money issues with your kids? Do you believe in giving kids an allowance? If so, is it "free money" or are there chores associated with the allowance? Do you feel comfortable talking about money with your kids? Some parents are very secretive; others are very open. Where would you place yourself on that scale?