They learn the three Rs, the basics of addition and subtraction, how to ride a bike and stay afloat in the water.

But very few children are taught the fundamentals of financial literacy during their formative years — how they should handle it, make it, spend it wisely or save it for a rainy day.

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And as we move into an increasingly cashless society, it becomes imperative that children understand how digital money works, how payments are made, how interest accrues.

A recent study by CommBank research found that fewer than one in 10 parents felt their child fully understood the value of digital money, and a further one in three (35 per cent) of children don’t understand how digital purchases are paid for. For example, 40 per cent of five-year-olds believe a plastic card accesses free money from a machine in the wall.

And yet the amount of pocket money children receive per week has increased, with the average child now receiving $10.36, up from $10.17 in 2013.

It may sound trite, but, according to the experts, the trick to creating financially astute (and solvent) young adults, is to teach them the value of a dollar from an early age.

Get that kid to work. Photo: Shutterstock

Make them earn it

Finder.com.au money expert Michelle Hutchison says parents need to regularly find ways to teach their children about how money comes in and goes out.

“Children learn their money habits — good or bad — from their parents and it gets passed down from generation to generation,” she says.

Ms Hutchison and her husband are already starting to hammer home smart-money messages to their three-year-old boy.

“We have set up a money box for him and he can see the fundamentals of saving money in that box to then go and spend on things,” she says.

“Another idea is to actually show your child the bills, so they can see how the graph calculates your bill and maybe you can devise ways together to get that graph down next time.”

Make them mini-entrepreneurs

While it is important children learn money does not grow on trees, according to accountant and money coach Melissa Browne, parents also need to take it a step further and teach their children to think “critically and creatively about money”.

“I have a friend who has given his son a job to do and asked him whether he would like to be paid by the hour or by units,” says Ms Browne.

“At first his son was keen to be paid by the hour, but then he worked out that if he worked harder and was paid by unit he could earn more money.”

Ms Browne says if children want to purchase something but haven’t earned quite enough money to buy it, parents should help them come up with a solution.

“Rather than just giving them the money, they should look at alternative ways of finding the shortfall, such as selling toys on eBay,” she says.

“It is about teaching them how to problem solve with money.”

Rage against the indolence of adolescence. Photo: Shutterstock

Word up teenagers

As children enter their teenage years, it is time to take the training wheels off, according to Ms Browne.

“If they are old enough to get a job, or start up an entrepreneurial venture, make it clear there are some things they are going to have to pay for themselves,” says Ms Browne.

“And if they do have a job or are bringing in an income, make them pay some of that to you in board.

“If you are giving them money for jobs they are doing, you may want to tax it at say 30 per cent to teach them about tax rates.”

Ms Hutchison adds that when teenagers sign up for their first ATM cards, it is important they also receive a lesson in fraud and ATM security.

“They need to learn not to write their PIN down, or to use ATMs in poorly lit areas, as well as what to do if their credit card or bank details are stolen,” Ms Hutchison points out.

“They also need to make sure they understand the basics of the financial products they are signing up for. It surprises me how many adults don’t even know this.”