I recently had the chance to read Money-Smart Kid$ by Gail Vaz-Oxlade. (I'm a huge fan of hers by the way.) It was quite an interesting read. I have to say that she certainly knows how to bring finances to a kid's level.
The book is all about teaching parents how to teach their kids good money management. She encourages parents to have their kids split their money into groups, spend, save, and give (to charity). This introduces fundamental lessons early on. As kids get older (and hopefully more responsible) she suggest giving them access to more financial resources, such as handing over control of their yearly clothing budget. They'll either learn to spend it as they need it and save for the big items (like prom clothes) or spend part of the year wearing what was "cool" last season.
She even explains how to introduce concepts such as credit cards and borrowing before they are out in the real world with big and painful consequences. I love the way that she suggests to open the bank of Mom and Dad for credit. Let your kids spend when they are with you using their homemade "credit card" (obviously you pay the store with real money) and then the parents present the kids with their bill monthly. True to real life if the total balance (which should be reasonably capped) isn't paid off each month interest starts to accumulate. If they continue to fall behind on payments you have the option of foreclosing on what ever they decide to use as collateral (new MP3 player perhaps?) and of course if they ruin their credit history with you they eventually won't get any more loans from you. Better they learn the painful lessons at home rather then out in the big bad world where they can cause permanent damage to their financial future.
The only bone of contention I have with her suggestions is the idea of an allowance. I understand that kids need access to money so that they can learn to use it properly but I would worry that just handing over a certain sum every week would not teach them the value. I earned money as a child by reading books and writing reports on them. (See this post.) I think that it was a fair way to earn money, I could earn as much or as little as I wanted, and I knew how hard it was to get. For families not as book oriented as my own I'm to sure what to suggest. Everyday chores (like making your bed or cleaning up the kitchen) should not, in my opinion, be paid for. (You help get it dirty, you help clean it up.) but being paid for jobs above and beyond normal chores is an option.
All in all I think this is a great read and would recommend it to any parent. Though I would recommend your kids earn their money I think that you will find plenty of valuable advice in this book on how to introduce your kids to the reality of money.