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When our daughter, Meredith, was growing up, we were determined to teach her more about money matters and responsibility than our parents had taught us. (Sound familiar?) Still, we'll never forget when she got her first paycheck from a part-time job. She stared in horror at the net sum and said, "Why is so much taken out for taxes? There's practically nothing left!"

Welcome to reality, kid!

Let's get one thing straight right off the bat: We're not out to tell you how to bring up your kids. But we absolutely believe that a healthy example of sound money management is one of the most important gifts you can give them. "Managing" a child's money smarts through elementary school, adolescence, college, and early adulthood takes vast reserves of energy, but the rewards are priceless.

One important way you can do that is by being smart about your own finances, which you'll need to do anyway to meet the growing expenses of raising a child.

Believe us, we've been there. Let's start at our beginning. . . .

The Timeless Formula

We were pressed for money when our daughter was on the way. The centerpiece of our living room—we were still in our bare-bones first apartment—was a big promotional Cinzano bottle that Daria put in a prominent spot on the floor, and we started throwing all of our spare change into that bottle. We managed to amass $400 toward the cost of Meredith's delivery -- a fortune to us at the time!

That was in 1972. Today we can't imagine a bottle large enough to hold the thousands of dollars in spare change you'd need to go to the hospital and deliver a baby. We hope you have health insurance to cover it.

Then there are those prospective parents who go through heroic measures to have a baby. We get calls from people who want to adopt children—a $20,000-and-up proposition. We hear of couples who can't conceive without tens of thousands of dollars in fertility treatments, single women and lesbian couples pondering the costs of artificial insemination, women over 45 considering donor eggs, gay couples looking into having a child by surrogate. We hear from people on their second marriage who already have children from first marriages but want to have another baby or two to cement this new "blended" family.

Any way you look at it, the formula doesn't change: Kids = Expenses.

The American family survives, and even thrives, against all possible odds, but it takes mucho moolah to start and maintain a family. The U.S. government has calculated the cost of raising a child from birth to the age of 18 as a whopping $160,140 for a middle-income family. Talk about sticker shock! Consider that this is the cost before you even begin to touch college tuition.

Here's an important point: We think you'll feel much better about that cost, as we did, when you break it down. It translates to $8,896.66 a year, $741.38 a month, $171.08 a week, or just $24.24 a day. You can manage that, can't you, in return for having your heart swell with pride and love every time you hold your child's hand?

If we were talking about anything else, we'd say wait until you can afford it. But you can't always postpone the arrival of a baby. And let's be realistic—who is going to let a little thing like money get in the way?

Your First (Baby) Steps

What we will say, though, is that if you want to start a family or add to an existing one, all of our advice about living on a budget (or, as we prefer to call it, a "success plan")—steering clear of debt; avoiding getting overextended with too many houses, cars, and other grown-up toys—all of this advice applies, quadrupled.

By the way, whatever your income level, it still isn't a bad idea to find some large vessel and throw spare change in whenever you can. Make it a little secret stash. You'll be surprised at how it will add up. We still keep a stash!

When Meredith was a child, we started putting some money into mutual funds for her. We didn't think she was particularly concerned about the value of her investments . . . until the morning after October 19, 1987. Remember that day known as "Black Monday," when the Dow Jones Industrial Average plunged by 22.6% and a five-year bull market came to a screeching crash?

Meredith, who had just turned 15, walked into the kitchen where we were preparing breakfast, and asked us, "So how much money did I lose yesterday?"

Children and adolescents hear about bad news in the world and carry all of the weight on their fragile shoulders. More children than adults suffered post-traumatic stress syndrome in the year following the September 11th terrorist attacks. We wish we had a prescription for all of the world's ills. But we can tell you how to help your children feel more secure in insecure times by showing them that you are in control of your finances and teaching them how to be money-savvy.

Kids who learn early on how to properly manage their money have greater self-esteem and a sense of independence. Bad money habits may lead to problems in other parts of their lives later.

It's never too early to talk to your kids about financial responsibility. Just how early? You can start talking to kids about money as soon as they understand the concept. For example, when they reach age five or six, you can say to them, "This toy or candy bar costs so much money." You can use Monopoly or real money to show them.

We'll leave you with what we consider to be the most important advice we can give you on this subject: Kids are copycats, so parents had better practice what they preach. Show them how to be money-savvy by spending and investing wisely yourself, and by saying no both to yourself and to them when something is too expensive.

You and your kids will be richer for it – in more ways than one!

Learn more about teaching your children smart money management with these articles:

• How to Bring Up Money-Savvy Kids
• Summer Jobs – Everybody Wins!
• How Much Allowance Should You Give Your Child