If you don’t want to end up with a teenager holding his hand out at every opportunity acting like there must be a family money tree in your backyard, then you better start early teaching your child financial responsibility. While teaching your kids about money, it’s a great time to teach them to be charitable too.

Wise money management skills can be taught to very young children and modeled throughout life. Teaching children to save is an easy thing to do, one that will reap rewards in the years ahead. Children do what children see. For good or bad, they see how you manage or mismanage your hard earned dollars. When they see you saving to buy a certain item, it will impact them. Exposing them to smart saving habits and saving for a rainy day is a wonderful gift to them that can last a lifetime. At the same time, make sure they also know the importance of giving some of what is saved to those in need.

If you are like most parents, you might have no clear idea on how to start educating your children about saving, so here are 5 things you can do to get your children started on becoming financially responsible at an early age.

1. Teach your children what money is as soon as they learn how to count. It may be a long process but with a little patience, they will soon grasp the meaning of money. Involve your children when counting and rolling change and set a clear jar for change on your countertop. Have them drop your change each day into the jar. Seeing the change grow motivates them and instills the concept of saving.

2. Show your children what they can gain by saving money AND what they can give to other. Abstract ideas may be hard for young children to understand so you should give them concrete examples. For instance, instead of using up their last quarter to buy a candy bar that is bad for them anyway, encourage them to save all their quarters in a piggy bank and once they have enough, they can use the money to buy something they really like. Also, let them put a portion of the offering in the plate at church or start showing them organizations that help others in your community. Have them help gather clothes and other items from their room to donate.

3. Encourage your children to save a portion of their allowance each week. Young children who are unmonitored when it comes to money normally use up their weekly allowance within a couple of days. Teach your children to set aside a certain amount at the start of the week to put into a bank and budget the remainder for every day of the week.

4. Show your children that money comes from hard work. You can do this by giving them a quarter for doing “extra” chores, fifty cents for dusting the dining room, a dollar for weeding the flower bed, and so on. This is an excellent way to show your children that money does not come from trees; they will need to work for it.

5. Open a bank account for your children. Most banks today offer special savings accounts designed for children. Once or twice month, take your children to bank so they can deposit some money in their account. Explain to them that the more money they put in, the more it will grow.

When do you start an allowance? How much? What do they need to do?

There’s not better way to teach your child to be financially responsible than by giving them an allowance. It helps them learn how to make good financial decisions, understand the benefits of saving and dealing with limited financial resources.

However, there are several things you should consider before handing your child an allowance.

How much is a fair amount? Money experts suggest that children should receive between fifty cents and one dollar a week based on age. Example: If your child is ten years old, he should get between $5.00 and $10.00. However, this is strictly your decision to make and you have to base it on your own financial situation.

Will the child’s allowance be linked to chores? This is something you have to decide. It does teach children that money doesn’t come freely. On the other hand, if the allowance is linked to chores and your child neglects to do them, no allowance should be forthcoming. If the child does his chores on some days, but not on others, his allowance should be docked.

Though there is no set age to start giving children and allowance, they should get one by the time they are eight years old. This helps the child learn from an early age that decisions about money have consequences.

The connection between an allowance and chores is a controversial subject. Some money experts feel a child should learn that money is earned by working. Others feel that kids should be responsible for certain household chores that will help the family and that no financial reward should be offered. One way to alleviate this controversy is to assign certain chores to help the family and others that are connected to the allowance.

Whatever decisions you make about your child’s allowance, be consistent. If they do their chores, be sure they get the money that is coming to them. If they don’t do their chores, cut off or dock the allowance. This teaches them responsibility and that they must live with the decisions they make.
Remember to help them set aside a portion of the allowance for savings and charity. Talk with your child about people and organizations they would like to help and what percentage they would like to give each month. As your child becomes a teen, how your teen spends the rest of their allowance should be up to them. Don’t force them to buy necessities, such as clothes and school supplies with their portion of their allowance. If your child chooses to do so, that’s fine. However, allowing him to spend his allowance on whatever he chooses will teach him to make good financial decisions. When he makes mistakes, explain what they were and how he can avoid them.

Teens will need a clothing allowance above and beyond their regular allowance. Help your teenager to set up a clothing budget and encourage him to stick to it. However, if he chooses to spend $80 on a pair of blue jeans that he’s been wanting for ages, don’t discourage him. He will learn that purchasing a big ticket item will make it necessary to be thrifty for other clothing purchases. Whatever you do, don’t hand your child or teenager extra cash when their allowance is gone. This will promote good spending habits and financial responsibility now and in the future.

As your children get older, show them some of the bills that you are required to pay, such as bills for electricity and cable. Tell them that planning ahead for expenses is a wise thing to do. Talk to them about hard, unexpected financial times. Illness and being laid off are a few examples to speak to them about. Share with them that when someone has saved for a rainy day, they have a cushion to help them through these difficult financial circumstances.

Don’t forget to teach your children about sales tax and how to calculate how much tax is added to purchases. Once they have a basic understanding of savings and a savings account, you can introduce them to the concept of savings bonds, pointing out how interest is compounded. Older teens should be at least introduced to the concepts of the stock market, credit cards, mortgages, car loans, insurance, student loans, ect. The best way to prevent a college graduate from graduating with a pile of debt is to start teaching them early. Learning about financial responsibility can’t start when they are already in debt; it should start from childhood.

Teaching your children to save and give a portion is a win-win situation. It is one that will impact the rest of their lives in a positive way. What a wonderful gift to give your children.