The summer doldrums are upon us. U.S. financial markets were closed Tuesday in observance of the July Fourth holiday. They closed early Monday, and trading volume is expected to be light Wednesday, as many people take an extra vacation day.

This holiday-shortened week is our chance to take a break from the daily mood swings of the markets. Let’s focus today on what matters most: our families.

As I’ll brag to anyone who’s willing to stand still long enough to listen, my daughter Jennifer is the proud mother of twin toddler boys.

The boys are only seven years old, but I spend a lot of time buying brain development tools for them.

Welcome to competitive grandparenting.

I’m also getting ready for the day when I will teach them the facts of life…financial facts, that is. (I’ll let their father handle the birds and the bees.)

Which brings me to today’s timeless topic. If you haven’t taught the kids in your family about money and investing, you’re doing them a great disservice. Whether you’re a parent, grandparent, or another type of authority figure in the household, here’s how to do it right.

Raising the next Steve Jobs…

Who knows? You could be laying the foundation for the emergence of the next Steve Jobs.

Finance is a topic that’s awkward for many parents to tackle. They must brace themselves for a lot of uncomfortable questions they’d rather avoid, such as:

How much money do you make? Are we rich? Are we poor? Do you make more money than the neighbors? Who makes more money, mommy or daddy? (Handle those questions at your discretion.)

It’s also possible that you’ve made a few money mistakes over the years that you’d just as soon forget.

But taking the time to instill financial literacy in your children can set them on the path to self-sufficiency, a gift only an adult role model can give. The advice below should help your children become savvy about money and investing.

• Open a checking account in your child’s name.

Most banks won’t allow a minor to set up a checking account. However, a few banks do allow a kid to be a signer on an account as long as a parent is a co-signer. Search online for a suitable bank.

The crucial lesson of the checking account is balancing income and expenses. They’ll learn the importance of living within their means, taking responsibility for bills, and establishing priorities. Managing a checking account is a chance for them to demonstrate maturity.

Once the child has opened a checking account, segue to the basics of online banking. Managing an online account can be a thrilling experience for kids who tend to become computer literate at an early age. Some banks text message account info to smartphones, which most kids would consider pretty nifty.

And don’t forget to explain that just because there are still checks in the checkbook, there isn’t necessarily money in the account (a lesson that my wife Carole still hasn’t fully grasped).

• Encourage healthy sibling rivalry.

Get the “animal spirits” of free enterprise racing with some friendly competition.

Ask everyone in the family to create their own individual model portfolio. Set a start and end date for the competition (summer vacation seems like the perfect amount of time), and set some basic ground rules to help highlight important investing lessons like diversification (one company can’t make up the majority of a portfolio). Once the particulars have been settled, start the virtual buying and selling.

Most importantly, don’t forget to offer a prize to the winner. Maybe some real cash to invest in a real portfolio.

• Explain income taxes and deductions.

Admittedly, this isn’t the most exciting topic for a child or parent. But it will seem important once your kid discovers how much Uncle Sam takes away.

First, make sure that when your child starts working, he understands how to fill out his W-4. Point out that you already claim him as a deduction on your income tax return.

The IRS defines a dependent child as under 19 years old or a full-time student under 24. A dependent child who has earned income must file a return only if the total is more than the standard deduction for the year. The rules are complicated (of course) and they keep changing. Consult IRS guidelines for details.

• Buy stock in a company that your child understands and loves.

Getting your kid to actually buy a few shares in a well-known company can provide lessons that stick.

Help him find suitable companies that provide products and services he’s familiar with, such as sports equipment, video games, electronic gear, toys, comic books, movies, action figures, bicycles, theme parks, restaurants… whatever sparks their imagination.

If he doesn’t have enough capital saved up, you can loan him the money with the understanding that he pay you back. This would be an opportune time to introduce the concept of interest. If you’re a soft touch (like me), you could make the investment capital a birthday present or holiday gift.

Once he has committed to a company, begin explaining the fundamentals of a sound investment. Explain the concepts of revenue, profitability and manageable debt. Make it clear that qualities such as earnings growth are more important than a company’s cool factor.

Demonstrate how to dig up and interpret information found on web sites, in newspapers and in financial statements. Investing Daily is a great place to start! Investigating a company together can be a fun, shared adventure. But don’t get too intense. Remember that this exercise is about planting intellectual seeds, not turning him or her into an overnight Wall Street wizard.

Buy stock in companies they know. Here are two enticing suggestions that happen to be good buys right now for long-term investors, with plenty of earnings momentum and stellar growth prospects:

Apple (NSDQ: AAPL), a consumer icon whose laptops, smartphones and tablets pervade modern life.

Walt Disney (NYSE: DIS), a multi-media stalwart that provides products and services beloved by kids all over the world.

So go ahead and have that “awkward talk” with your kids…about money.

Editor’s Note: My colleague Jim Pearce, chief investment strategist of Mayhem Trader, has spent the past year perfecting a powerful indicator that’s designed to make money during market imbalances.

Jim has a proven knack for reaping profits from Wall Street mayhem. To learn more, click here.

John Persinos is the editorial director of Investing Daily.

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