Many parents want only the best for their children, and strive to give children everything a parent can give them. If parents are able, they may give grown or growing children gifts like money for college or the down payment on a new home.

However, parents can do their children a big favor by giving them something else – the knowledge to manage money responsibly.

It is never too late to teach your children about responsible money management. While it is true that children can learn about money early in their lives, even teenagers nearing college-age are not too old to start learning how to handle money responsibly. Financial management may or may not be taught at school, so teaching financial responsibility at home is definitely worthwhile. Additionally, children may run a greater risk of growing up to make bad financial decisions, if they do not learn basic money values at home.

 1         Integrate Money into Daily Life

Get your child involved with thinking about household money on a daily basis. There are many opportunities to use these lessons and help your child get a better understanding of money:

• Take your child grocery shopping. Compare the prices of two similar items. Discuss why the prices might be different.
• Let your child participate or watch when you pay bills. Explain the amounts when needed.
• Let your child know how much comes in each month, and how much goes out. Show how expenses add up.

 2         Use Comparisons a Child Can Understand to Help Them Understand the Value of Money

For young children, or even older ones, talking about money may be abstract and difficult to handle. Get creative about your approach. Examples might include:

• Instead of stating that “Milk costs $4.00,” you might say, “I have $4.00 to spend. I could buy a gallon of milk, two packages of chocolate chips, or two bags of apples. What would you choose?”
• If you make $16.00 per hour in your job, tell your child that $4.00 milk equals 15 minutes of time working at your job.

 3         Give Your Child an Allowance, but Consider the Frequency and          Amount

What you are able to give your child for allowance will be determined by your own household financial situation. However, consider the possible benefits of allowance:

• The child has actual money to work with and learn how to handle.
• The implications are real. Once the allowance is gone, the child needs to save more in order to buy another item.

If you are determined to teach your child about responsible money management and living within their means, then stick to the rules – keep the allowance dispersed at given times and do not extend “credit.”

Some financial experts recommend disbursing allowance once a month rather than once a week. This gives the child a longer amount of time to learn how to manage a given amount of money. It may also make the allowance larger, again allowing for more management skills to be learned.

 4         Model Good Financial Behavior

You are a model for your children. Are you late on your bills? Are you living beyond your means? Get your own financial house in order and be honest with your children. Let them know why you are doing what you are doing, and then embark on sound financial management principles as a family.

 5         Teach Your Children about Choices in Managing Their Money

Spending is not the only option for your child when managing his or her money. Saving, investing, or donating to charity are viable options.

 6         Back off and Let the Child Learn

If your child wants to spend his entire allowance on an expensive toy that he thinks he must have (instead of several smaller items), let him. In this way, he will learn that the money is used up and unavailable (for now) for other things the child may have wanted.

 7         Share Long-Term Household Financial Goals

Explain to your child the value of long term planning. If you are saving for expensive home repairs this year, your child needs to understand that you are dealing with a finite amount of cash. Other long-term goals – such as a particular vacation, for example – may need to be delayed until the next year.

 8         Make It Fun

If you have a labored and stressed attitude about money, your child may carry that forward into their adult life. Express thankfulness and gratitude for the money you have, and the ability to manage it wisely. Have your children create a lemonade stand or sell homemade crafts for a small profit if they enjoy doing those sorts of things.

 9         Say No and Mean It

Your child may ask for a loan or an increase in allowance and you may be tempted to give in. However, the child will never learn how the real world works – or how to live within their means – if you keep giving in. Practice tough love if needed.

 10       Take Advantage of Additional Resources

• http://www.moneyinstructor.com has resources on teaching kids about money, including making money, starting a business, allowances, saving skills, and games.
• http://www.childrensfinancialnetwork.com is an organization devoted to increasing financial literacy for children and their parents.
• http://www.marketwatch.com has age-specific resources for teaching kids about money.