How many times have you wondered whether your children think money does indeed grow on trees? It probably seems like every time you turn around your wallet is being attacked by the "gimme's". (This takes many forms including "I want", "I need", and "Everybody else has ….") If you honestly examine your spending habits (and those of your kids), you may realize that you have not given them any reason not to believe that money is always readily available and in abundant supply.

In truth, we all want things and kids are no different. How easy it is to whip out the old credit card(s) to gratify our desire for things, which is how we Americans have managed to rack up an astounding $1 trillion dollars in just consumer debt. What message are we really sending our kids?

The booming economic '90s have left many of us with a false sense of financial security. Now with the economy in an extended downturn, families are looking for ways to scale back their expenses and teach their children the value of money. What follows is a collection of ideas derived from various sources about how we can instill in our children a better understanding of money and how it works.

Establish a Savings Account and a Plan

Every child should have his own savings account, where feasible, even if it has to be a temporary piggy bank. Whether your child receives an allowance or works a job, establishing a savings plan is a must. Encourage your child to donate a certain amount to charity (thus helping them develop a lifelong habit of helping others). Then establish a certain percentage for long-term savings (such as college) and short-term savings (such as clothes, toys, sports equipment, etc.).

Saving for both long- and short-term goals can build children's confidence in their ability to save and provides an opportunity to see delayed gratification in action. In an age when we and our children are bombarded with advertising begging and enticing us to "Buy Now, Pay Later," the concept of delayed gratification seems to be largely lost and deserves a resurrection. (Adults would do well to do this as well-it is amazing how a little time can change our wants and needs!) In addition, once the savings goal has been met, children may even discover that the money would be better spent for something else.

Finally, allot a small percentage for discretionary spending, if desired. You might find that the following percentages work well: 10% charity, 50% long-term savings, 30% short-term savings, 10% spending. Find a balance that works well for you and stick with it. Check on your children's finances regularly and help them as needed.

Hold a Bill-Paying Night

This is a great activity to show your school-age children where your money goes. You might even learn a bit yourself.
First, assemble a list of your monthly and/or weekly expenses and their amounts. The amounts don't have to be exact; it's the principle behind the amounts that counts. Write the expenses and their amounts on separate slips of paper. Then, add up your monthly income and use pretend money (or make your own) to represent the amount. (Make sure you have enough smaller denominations to be able to "pay the bills.")

Next, take the expense slips and give them to your children. Have them come to you and "collect their bill" one expense at a time. This is an excellent visual representation of how quickly the paychecks get depleted!

Afterward, as a family discuss ways you can cut your spending to help stretch the paychecks for things that are really important. You might be really surprised at your children's input. Create a family plan and put it into action. Post a reminder on the fridge or some other obvious place.

Encourage Them to Work

Even young children can do extra chores around the house or yard, or for neighbors, to earn extra money to save for things they want. Teenagers should be encouraged to get a job, where possible. Working helps children understand that money comes at a cost, thus dispelling the money-bearing tree notion. Working also improves their self-esteem and you can teach them to take pride in their work and derive satisfaction from it.

Open a Checking Account

If your child earns enough money to justify a checking account, help her open one in both your names. Teach her how to make deposits and withdrawals, how to write checks, and how to balance the checkbook. These are invaluable skills. If these are skills that you lack, have the financial officer explain everything when you open the account. This way neither of you looks dumb, and you both get an education.

Have a Family Savings Fund

Save as a family for large expenses like vacations. Post a chart tracking your goal and your progress where family members can be reminded of it. Set up a jar or box for keeping the money in. If you're worried that you or the kids might be tempted to tap into it for "emergencies", establish a family rule that money can only go in (or out) of it when all family members are present and agreeable.

Establish Spending Limits

Establish spending limits for items like clothes and shoes. Be willing to pay so much for something, but your child must make up the difference with his own funds if he goes over the allotted amount. For example, he may want a $100 pair of shoes. You agree to pay what you would normally pay (say $40) and he has to come up with the rest. New school clothes take a huge bite out of the family budget every fall; why not enlist the aid of your kids? Agree to only pay for so much and then leave the buying up to them (within reason, of course). They may really surprise you with what they are able to do with their money. Encourage them to watch for sales, etc., in order to maximize their dollars.

Take Your Child Grocery Shopping

If your child can run a calculator, she can help you grocery shop. Give her a fixed amount that you will spend on groceries and have her subtract each item from the total as you shop. Teach her to compare food labels and get the best product for the money. Store brand products are often as good as the national brands. Ask for her input about how you can reduce your overall grocery bill.

There are many ways to teach your children the value of money (and you've probably come up with more on your own) and at the same time help them build valuable lifelong skills. If you don't teach them, who will? My own sister found herself wallowing in several thousand dollars debt at the tender age of 21, and trying to hide it while convincing herself that she could get out of this mess alone. She couldn't. Bill collectors were hounding her and my parents. My parents had to take out a loan to bail her out and she is now paying them back, but working three jobs to do it. It's been a lesson for all of us that kids need to be taught financial skills; it is not something that comes naturally. So take the opportunity to call a cease-fire in the battle between your kids and your wallet and work out a compromise in which both sides win.

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© Simple Joe, Inc.
Chemain Evans is a quality control specialist for Simple Joe, Inc., makers of the popular Simple Joe's Expense Tracker PC software. Expense Tracker is a quick and simple way to keep track of your expenses and stay within your budget. Expense Tracker is ideal for tracking personal, business, home and club expenses.