My father emigrated from Taiwan in the 1960s with only $17 to his name and the clothes on his back. Though he was poor in a material and financial sense, he never considered himself poor. His mantra was that financial wealth alone does not represent one’s “true wealth.”

My dad taught me not to define myself by how much I had, but by what I did with what I had. I learned early on not to let money be the sole determining factor for the decisions I made in life, but I also learned that, although money couldn’t buy happiness, it could provide peace of mind, freedom and flexibility. I am thankful for the values my father instilled in me about “true wealth,” but I am also grateful that he taught me about finances. My dad understood the importance of financial literacy and has left me a legacy that I am now passing on to my own three children.

Financial literacy is having the knowledge necessary to manage personal finances efficiently. Financially literate people know how to achieve long-term goals and make healthy financial decisions. On the other hand, those who are not financially literate have difficulty applying financial decision-making skills to real-life situations. Not only do they tend to make unhealthy money decisions that create financial problems, they have trouble reaching financial milestones. In America today, financial illiteracy has become an epidemic. A study done by the Financial Industry Regulatory Authority Foundation estimated that nearly two-thirds of Americans can’t pass a basic financial literacy test. That’s a problem.

Whereas basic literacy is a priority for public educators, financial literacy is not.

Educators and pundits are still debating the part public schools and universities should play in promoting financial literacy — and clearly, it should be more than it is. Parents, however, do not have to wait to begin fostering financial independence in their children at home.

Here are some things you can be doing right now to raise financially literate children.

1. Teach your children to work hard. Children need to understand the correlation between work and earnings from a young age. If your kids are actually doing the work they’re getting paid for, don’t be apprehensive about paying them to work. Rewards motivate children, and money is an attractive reward. Allowing them to take on chores that they can get paid for not only teaches them the value of hard work but helps them learn how to manage their money. If they don’t do their work, don’t pay them.

You can also cultivate their entrepreneurial spirit by encouraging them to offer babysitting, pet care and yard work or housecleaning services to friends, neighbors or relatives. Kids who work for pay can learn the cost in labor of an impulse buy without monumental consequences. They can also learn the satisfaction of working hard to build savings and achieve goals.

Children who understand the value of hard work learn to be responsible for what they produce.

2. Give your children vision. Financial planning is about defining your personal goals and creating a realistic plan to accomplish them. Discuss your family’s financial objectives with your children and let them see what you do to achieve them. Encourage them to explore their own ambitions and aspirations for the future and set personal financial goals.

Their plans and objectives can and probably will change, but learning to implement both long- and short-term goals allows them to taste success and enjoy the fruit of good planning.

3. Help them learn to save. Helping your children learn the value of regular and disciplined savings is a gift. As soon as they are old enough to start filling up a piggy bank, they can begin saving. When the piggy bank is full, set up a savings account and let them manage their records so they can see how much they are saving over time. This will be a valuable lesson during their teen years, when they’re tempted to spend savings meant for a car or college on food, clothing and friends.

Children learn by doing. Help them create a workable budget that prioritizes savings but develops self-control. Then teach them to save regularly and systematically by establishing a timeline to reach specific goals. As they begin to experience the benefits of savings firsthand, they will start saving on their own.

4. Talk to them about investing. Teaching your child the fundamentals of investing early is a worthy investment in their financial literacy. It does not need to be complicated. Even very young children can plant a seed and watch it grow over time. Board games that teach about money provide excellent opportunities to show children how investing works. Kids can also see how compound interest works with acompound-interest calculator, which allows them to calculate how much even a small investment now can yield in profits over time.

You can introduce your kids to basic but important concepts such as inflation, interest rates and investing in companies they respect by merely talking with them about what’s happening in the economy.

 Teach them to give. Children need to learn to share, because they need to learn their stuff isn’t what’s most important. Learning to give from what they earn not only teaches the value of generosity but helps them see that making money is not the most important thing in life.

Organizations such as World Vision offer a gift-giving catalog that allows children to choose practical gifts such as chickens, goats and clean water for children and families in other parts of the world. Giving a portion of their allowance to the children’s hospital collection in the checkout line or donating to the Salvation Army at Christmas provide opportunities for kids to discover what they value most and support it in tangible ways.

6. Show them how to budget. Teach your children that no matter how hard they work, it’s unlikely they will be able to save, invest or give without budgeting. Even young children can learn to budget by distributing their allowance in jars designated for long-term savings, short-term savings, giving and spending. Older children can transition into a more detailed envelope system and a written budget and eventually manage their budget through an app.

Budgeting helps kids learn how to save for what they want and need without going into debt. The principles of budgeting can be taught from a young age and sustained as a child grows into adolescence and adulthood.

7. Warn them about debt. We live in a consumer-driven culture. Even with a sound budget, debt can be hard to avoid. Children need to understand the costs and implications associated with debt so they can develop the self-control necessary to avoid bad debt and use good debt wisely. Satisfying your child’s impulse by buying them what they want and justifying it by making them pay it back later is not teaching them to handle debt; it’s encouraging impulse buying.

Bad debt is anything that depreciates. Open credit card balances and car payments are bad debt. Traditionally, good debt is something that brings returns. Borrowing to finance a home or college degree has long been considered good debt, but times have changed.  Total student loan debt in the U.S. was $1.48 trillion, now this record is $1.75 trillion.

We are just now beginning to recover from the sub-prime mortgage crisis that caused the 2008 financial crisis and subsequent Great Recession. Make sure your children understand that even good debt costs. Help them learn to count the cost and understand the obligations associated with debt.

8. Don’t solve their problems for them. Parents like to fix things for their kids. We don’t like to see our children suffer. Unfortunately, alleviating the pain associated with bad financial decisions fosters financial ignorance, even if it’s as simple as fronting the money to your 10-year-old to buy the latest video game after he nickeled-and-dimed away his allowance. Financially literate children understand that poor spending habits have consequences.

Of course, to raise financially literate children, you need to endeavor to be financially literate yourself. Your willingness to raise your own financial IQ will not only set an example for your kids but will most likely improve your own financial situation.

Read more about student loans debt here at Credit Summit

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