Boy holding allowance money © Bryan Mullennix, Photodisc, Getty Images

A growing body of evidence tells us financial literacy education doesn't work, at least not as it's currently taught. Perhaps one reason is that we're not starting early enough. We should begin before the kids are in kindergarten.

You might think that's a stretch, given that many preschoolers are still grappling with the notion that a nickel isn't worth more than a dime, even though it's bigger. But British researchers now are telling us that our approach to money is basically set by age 7.

Behavior experts David Whitebread and Sue Bingham of the University of Cambridge reviewed previous studies to determine how children learn in general, and how they learn about money in particular. They concluded that money habits -- including the ability to plan ahead and to delay gratification -- are typically formed early in childhood.

"The window is zero to 7," said Guy Shone, research director for the British government's Money Advice Service, which published the study. "It's very hard to reverse those habits later in life."

What if we missed that window? Are our kids doomed to a life of debt, manipulation by advertisers and various scams they won't see coming?

Not at all. Change may be hard, but it's possible.

Still, the study reminds us that we need to start teaching good money habits as soon as our kids understand that money is used to buy things.

"Parents as a group typically don't feel particularly comfortable talking to kids about money," said Shone, the father of a 2-year-old. "At the same time, we know there's a huge effect we have. . . . We underestimate how powerful we are as parents."

Parents who are trying to teach older kids should expect that their job may be harder, said financial literacy advocate Susan Beacham, since they're changing mindsets rather than shaping them.

Those with younger kids should take advantage of their opportunity to reach children "at an age when they . . . still think we are geniuses," Beacham said.

The simple act of grocery shopping with a list can help teach the importance of planning ahead and "shopping systematically" rather than "just grabbing things off the shelf," said Nancy Baynes, a spokeswoman for the Money Advice Center.

Even better is involving your kids with lots of hands-on experiences, which will teach them far more than lectures. Among the things we can do:

Require them to save. Young children save because they enjoy participating in adult-like behavior, the researchers found. Inculcating the savings habit when kids are small -- something financial literacy researcher Lewis Mandell calls "indoctrination"-- may be the best approach if you want your kids to be savers as adults. Requiring children to put aside a portion of every dollar they receive or earn can help develop the habit.

Let them make purchases -- and mistakes. The idea that money is a limited resource -- that it must be given up in a transaction and can only be spent once -- is one that young children struggle to understand. Parents can reinforce the concept of exchange by giving children a small amount of money to spend in a store -- and then not shelling out if the child is later disappointed in the purchase, or wants more.

Image: Liz Weston

Liz Weston

Let them earn. Kids need to know that we can't afford to buy everything we want and that what we can afford is determined by our incomes. Talking about various jobs and their salaries is one way to teach this idea, as is paying children to take on extra chores around the house so that they understand they're trading time and effort for money.

Make delayed gratification easier. Help your children set goals, such as saving up money to buy a toy or a game. A chart that tracks their progress can keep them interested and engaged in achieving the goal. Teach them strategies to make waiting easier. If children are tempted to spend money rather than save for their goal, you can distract them from the latest shiny object by helping them plan a fun alternative (going on a bike ride, making a craft from items already on hand) to help them resist giving in to the impulse.

Take them grocery shopping. Being involved in decision-making can help kids understand the trade-offs required in economic transactions, which can make it easier for them to delay gratification. A child might help a parent compile a shopping list, since lists help people prioritize what they need most in contrast to all the things they might want. Parents can discuss sale items, which sizes are most economical and how they make decisions in the store.

"Just talking to your kids about what you're doing, what you're thinking, your decision-making process, can be really powerful," Shone said. "You never know specifically what message is landing, but by doing that regularly and repeatedly . . . it becomes part of how the child sees the world."

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Liz Weston is the Web's most-read personal-finance writer. She is the author of several books, most recently "The 10 Commandments of Money: Survive and Thrive in the New Economy" (find it on Bing). Weston's award-winning columns appear every Monday and Thursday, exclusively on MSN Money. Join the conversation and send in your financial questions on Liz Weston's Facebook fan page.