Teaching kids about finances is tricky to navigate. You want them to be informed but not burdened as they try to make sense of your family’s finances. However, financial literacy is a critical skill for success in the real world. According to a recent Bankrate survey, over half of Americans do not have enough in savings for an emergency expense of just $1000. It is imperative to teach your children about personal money management, so they know when to save and when to spend. To get the conversation started, here are a few quick tips to help you teach your kids about money and thus improve their overall financial literacy:

1. Focus on values. Explain to your child what your values are and how those impact your spending. Our values often determine why we spend our money they way we do. For example, if you value education, you might prioritize donating to educational programs or investing in your own schooling. Focusing on values allows your child to determine what’s important to them and they can learn to prioritize their spending accordingly.

2. Create Good Saving Habits. After demonstrating how you prioritize your spending goals based on your values, help your kids create their own goal. Maybe they want to save up for a new bike. Help create opportunities for your kids to earn the money needed to make the purchase. It could be things like chores around the house, walking peoples’ dogs, babysitting, etc. By doing this, you teach them how to save for a goal. Learning how to earn and manage smaller amounts is essential for understanding money. It’s better to make mistakes and learn the benefit of good saving habits now instead of later in life.

3. Explain pricing. Another part of financial literacy is understanding why similar items cost different amounts. This is another opportunity for your children to learn when to spend and when to save. Let’s say you’re walking through a grocery store. Kids may wonder why a name brand cereal like Cheerios costs more than an off brand, but similar cereal like Toasted O’s. Take the time to break down “brand differences” and explain why Cheerios cost more than Toasted O’s. Is it worth it to buy the Cheerios? Or is it fine to buy Toasted O’s? It really depends on you the buyer and your consumer situation. Does taste make a difference to you and your family? Does the quality of the product matter? Do you just prefer brand over value? Understanding brand awareness and costs is a great way to explore financial literacy with kids and it will help them navigate similar financial decisions in the future.

4. Demonstrate cause and effect. Another great way to help your child learn how money works is by demonstrating the cause and effect of saving with real examples in your family financial decisions. For example, if your family wants to go on a trip to Disney World, but also eats out a lot, you might choose to reduce your out of home dining to save money for the trip. This demonstrates the benefit of saving to kids. They will have a greater appreciation for the vacation experience knowing the sacrifice you all made as a family to afford it.

5. Describe your reasoning. Explaining your financial decisions allows your child to understand the rationale of spending and saving and invites them to ask questions. Let’s say you’re purchasing a new car. Why did you pick that car? How are you paying for that car? Why are you purchasing it right now? These are all questions you can explain to kids to encourage curiosity and provide a more thorough understanding of the reasoning behind the purchases you make.

Financial literacy is a necessary life skill. To succeed in the real world, kids need to understand all the aspects of making financial decisions. Managing one’s personal finances can be a daunting and dense topic. By following these tips, you can find ways to help your kids overcome those hurdles, so they come away with a better understanding of the importance of managing money. Doing this will put your child on the path to become a financially literate adult.