Financial literacy is a massive problem in our country.  Daria and I have spent the last 20+ years trying to help people make sense of personal finance matters they were never taught how to deal with.

Of all the topics our children learn about in school and at home, teaching our kids about money gets short-shrift!

That's why we are thrilled to see yet another state--Arkansas--requiring that all high school students take a mandatory economics course before they can graduate.  This is a great start, but it's not nearly enough. 

Every parent must teach their kids about money so they grow up with the ability to make smart, confident money decisions that allow them to successfully manage their personal finances.

We believe it's never—we repeat, never—too early to teach your kid about money. This made us the exception among our own contemporaries, who brought up their children with some pretty unrealistic ideas about money—for the most part, our generation thought money was a grown-up matter and their little darlings should be denied nothing.

Is it any wonder why so many adults now in their twenties, thirties and forties are living on credit cards? Let's take a look at how The Dolan Plan ensures this doesn't happen to your children.

Step 1: Look in the Mirror

You can lecture a child on thrift and responsibility until you're blue in the face, but children learn money skills strictly by the example their parents set for them. So if you're buying anything and everything and wondering how you're going to make the next credit card payment while at the same time telling your children to save a little out of their allowance, it isn't going to work.

If you have been overspending, it's time for some soul-searching. Is the video game system the kids want going to cut into money you could be saving toward college? Why are you giving in?

Many parents spend out of guilt. Both parents are working, or the parents are divorced, and because time with the kids is in short supply, they try to compensate with things. Isn't it better to spend a little high-quality time with them imparting high-quality lessons in how to be financially secure in this crazy world? You bet it is!

Dolan Smart Money Move: Even if you are able to give your kids the moon, it's important that they learn money skills themselves. One of the best ways to teach you kid about money is to give them realistic amounts of their own money to handle.

That usually comes in the form of a weekly allowance. Insist that they spend their own allowance on some items, so they'll understand the value of money. Encourage them to save a portion of it. Here are our thoughts on how much allowance to give your child.

Don't tie an allowance to chores, but allow the children to perform some jobs and pay them extra for that. But if the child decides to rake leaves for some extra cash and he strews them throughout the yard, don't pay him. This is another lesson—in doing a job and doing it properly.

Here are some tips for teaching your kids money smarts at each stage of development, in a nutshell:

Ages 4-5

Start giving them pocket change. Let them spend their own money on gum or candy. Explain to them that if you buy the candy bar with this dollar, you will get back this amount!

Ages 6–8

On day one of first grade, establish an allowance so that you may begin to teach the concepts of savings, budgeting and spending skills—the basics of sound money management. Give a weekly unconditional allowance. The main purpose here is to learn how to manage money, so don't withhold the allowance as a punishment.

By all means, let them spend their money for those extra items they want.

Dolan Smart Money Move: When your child reaches the age of eight, we recommend buying her one share of stock in a highly visible company, such as a toy company or brand-name manufacturer. You can then show your child how to follow the stock online or in the newspaper. Plus she gets to see how supply and demand can boost share prices.

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