Jamie Gayton understands the importance of teaching children about money as well as — if not better than — anyone.

The father of three taught economics at West Point and later at the National Defense University's Eisenhower School before retiring as a colonel from the Army in 2017. He also co-authored a book on personal financial planning for service families.

Given his experiences and current role as executive vice president of member operations and global fixed assets at PenFed, Gayton views financial health and personal development through a unique lens. Here are a few of his thoughts about instilling healthier money habits in children.

Why is it important for parents to teach children about money and spending?

Children learn important subjects in school, but managing their finances is rarely one of them. This is a skill they'll use every day of their lives. Having them learn good habits initially builds a foundation that allows them to continue learning in ways that complement and reinforce these positive behaviors.

When should the education process begin?

You should start talking to your kids about money at a very young age. Initial education occurs by children observing how their parents and other adults manage their finances. Then, slowly, children should take on minor roles in the process. Most children learn better experientially than through explanation.

Who should lead the instruction? 

Teaching should generally be a joint effort between parents, grandparents, siblings, teachers, and other mentors, with each group reinforcing the other. However, parents ultimately own the responsibility and should be the primary teachers to help children learn how to better manage their finances.

How can you make learning about money interesting, informative, and memorable?

Make it as hands-on as possible by using your life events as a training ground. It makes learning more "real" for your children when they see real outcomes.

For example, when my children were around the 6th grade, I often showed them the restaurant bill, walked them through the review to confirm we had received all the items, and had them place the credit card in the dish. When the server returned the card and charge slip, we discussed how gratuities work and how to calculate an appropriate tip.

We also opened online savings accounts for my children when they were about 15 years old and provided them logins so they could see their accounts.

When they received checks as gifts, I deposited them. Within a few months, I began walking my children through the remote deposit process, completing the first couple of transactions while they watched. Now, they complete their own deposits.

Are there things you shouldn't do when teaching children about money?

Many years ago, parents often taught kids to swim by throwing them in the deep end of the pool. I don't recommend this, nor do I recommend opening savings, checking, credit cards, and other accounts and just letting your child sink or swim. It's important to introduce these new processes while they're still at home so they can look over a parent's shoulder and ask questions in a safe environment.

What challenges might you encounter along the way?

The pace at which you introduce new elements is crucial. You need to monitor how well your children are incorporating skills, then introduce new elements as they master the older ones and as you encounter them in your normal life. 

For example, we recently refinanced our mortgage. I walked my kids through the steps and made a point to explain fixed and variable rate mortgages, paying up-front fees and points, and comparing interest rates versus annual percentage rates, which are two very different things. We didn't decide to refinance simply to teach a lesson, but it turned out to be a great learning experience when it came along.

Has teaching kids about money changed in recent years, particularly with technology and a migration to more of a "cashless" economy?

Absolutely. But even though methods have changed, the underlying financial concepts and transactions remain the same.

For instance, it's no longer necessary to focus a great deal of energy on teaching children how to write checks. Instead, they need to know how to use a debit card and understand the difference between a debit card and a credit card.

How has this impacted the way kids learn about, use, and value money?

It reinforces the fact that whoever is teaching children how to manage money should be versed in current processes. This will ensure that the things kids are learning are relevant.

What are some of the consequences of not teaching children about money? 

Making uninformed decisions in a learn-by-doing mode can lead to bad money habits that last a lifetime. Overspending, lower credit scores, higher interest rates, huge debt, defaults — these are just a few of the negative consequences that can come from not teaching kids how to effectively manage their finances.