Teaching your children how to save and spend money helps them become smart consumers and financially responsible adults. Start the process when your children are very young by explaining the various values of coins and bills and teaching them that cash is exchanged for goods and services. As your children grow into teenagers, explain checking and savings accounts, credit cards, credit ratings and various types of investments so they have a comprehensive understanding of what it means to make smart financial decisions.
Step 1
Offer to pay for half the cost of expensive clothes, shoes or video games your children say they "must have," and ask them save up the rest, suggests Janet Bodnar, author of "Raising Money Smart Kids." Doing so teaches them to save for items they want and helps them understand the value of money from firsthand experience.
Step 2
Start a family savings account to which each member of the family -- including your children -- contributes to reach a shared goal, such as a family vacation. Keep a jar or piggy bank in the house, along with a chart on which your children can write down their weekly donations.
Step 3
Open a savings account for your children, and explain how compound interest works. Encourage them to deposit part of their allowance -- perhaps one-third or one-half -- into the account each week. Review their monthly account statements with them so they can see how much interest their money accumulates over time.
Step 4
Take your children with you when you shop so they can understand how much everyday and big-ticket items cost. Set a spending limit when you're going to the grocery store, and have them help you choose items that fit within that budget. Doing so helps teach your children to be savvy shoppers and learn to manage money.
Step 5
Give your children paid jobs to do around the house -- such as raking the leaves or mowing the lawn -- so they can save up for items they want to buy, says Lilly Lodge, author of "How to Teach Kids About Money." Avoid the urge to overpay for your children's services so you can teach them about the value of work and help them understand that immediate gratification doesn't always happen, Lodge adds.
Step 6
Set out three envelopes or jars for each of your children -- one labeled "Save," one labeled "Give" and the last labeled "Spend." Ask them to donate 10 percent of the money they earn from chores and allowance to the charities of their choice and to decide for themselves how much to save and how much to spend. If they have trouble managing their money, help them come up with ways to increase their income, and assist them in creating budgets.
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