US money expert Mellody Hobson says parents’ money anxieties are passed onto their children. Picture: Britta Campion

The little eyes and ears of children and grandchildren are constantly soaking up our money habits — good and bad — so it’s vital that they see and hear the good stuff.

Visiting US financial expert Mellody Hobson told an Australian Institute of Superannuation Trustees conference last week that the silver bullet to improve people’s financial futures was increasing their financial literacy, and it should start with children.

Children doing money homework “gives parents permission to learn”, she says, adding that parents also play a huge role in shaping their kids’ financial lives.

“I say to parents that all of your money fears and habits you are passing on, intentionally or unintentionally,” she says. “Whatever struggles, whatever anxiety you have around money you are teaching to your child, and you can make a conscious decision to stop that.”

Hobson knows money. She’s the president of $14 billion Chicago-based Ariel Investments, one of the biggest African American-owned money managers. She also chairs DreamWorks Animation and is a director of The Estee Lauder Companies and Starbucks Corporation.

Science-fiction fans may be happy to know that in 2013 she married Star Wars creator George Lucas, so you can add a working knowledge of The Force to her resume.

Money is indeed powerful, and can be a force for good and evil. Here are some ways for adults to demonstrate to kids and grandkids the power and the dangers of money.

1. MAKE SAVING AUTOMATIC

Show children how regular small deposits add up over time, with both your personal savings and theirs. Just $5 a week grows to more than $250 over a year, and that’s before the power of compound interest works its magic. If you pay pocket money, ensure they save some of it.

2. WATCH WHERE IT GOES

Bills and other expenses rule many lives, so keep kids in the loop, even if it means showing them receipts or bank statements. Some parents demonstrate this by piling bills and cash on the kitchen table then allocating lumps of money to each expense.

3. TIME FOR TECH

Hobson says a global challenge for modern children is that the use of physical cash is declining. “It makes the concept of money very theoretical, and data shows that our spending on credit cards and debit cards is higher than when we used cash, because of that disassociation,” she says.

However, digital money is the future, cash will only become more scarce, and kids are much better with technology than their parents. So you may as well start showing them how online savings accounts work, and the credit card bills that show what happens when you swipe your card at the shops.

4. DON’T FORGET TO SPEND

Demonstrate that money buys good things. Hoarding it is pointless if there is no reward at the end. Toys, electronic items, leisure activities and holiday spending money can be worthwhile savings goals to work towards with children and grandchildren.

Above all, be as positive as possible about money, and always remember that you’re being watched.