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Yesterday, Federal Reserve chairman Ben Bernanke announced, at a conference on financial literacy, that Americans need to to make wiser choices with their money. There was an implication that lack of fundamental knowledge about managing mortgages and building savings is at the root of today's economic crisis.

A financial analyst I know says that his biggest pet peeve is that personal finance is not taught as a course in high school along with other subjects. It amazes him how so many people make senseless spending decisions - using credit cards as personal bank accounts - because they never learned the basics.

On Globe Investor today, comedian , who runs a program called Funny Money in high schools, colleges and universities, discusses how to teach adolescents financial literacy.

Teenagers may be ready to learn how to balance a cheque book, but can you start the conversation with younger children? My five-year-old is still convinced that nickels are worth more than dimes because they're bigger!

A friend of mine who has written two books about personal finance, one of which was for children aged four to eight, believes that kids can and should be taught about money. She recommends starting with an allowance.

She recalls how her daughter, at the age of five, would ask to be bought every toy she saw. To curb that raw consumer instinct, my friend put her daughter on an allowance. At first, her daughter would spend the money as quickly as she got it. But she soon learned to save it up over several weeks so that she had enough to buy the doll she really wanted.

My friend advises against tying an allowance to chores around the house, as kids should be expected to take on household duties as a member of the family. However, parents should realize that kids have expenses too - whether it's a toy they desire or a snack when out with friends.

An allowance is the first step to teaching children how to budget for their needs - and setting them on the path to financial literacy.