Teaching children about money

Giving children everything they want, and not requiring them to work for anything, teaches them that the world owes them something and that they are entitled to a life of ease. If you don't want to set your children up for failure like this, there are three principles you need to teach them about money:

* Things aren't free. You have to earn them.

* Money is not limitless. You have to make some trade-offs and do without some of the things you want.

* If you spend it, you won't have it later. You need to plan ahead and save something.

Following are some guidelines for teaching children these principles:

Start early. Give children simple chores to establish the expectation that everyone has responsibilities. A four-year-old can put away her toys or help you fold and put away clothes.

Give an allowance. As soon as children are old enough to add and subtract, begin giving them an allowance. Tie it to their chores and don't hand over the allowance until they finish the chores.

Require children to use their own money for certain purchases. This applies mainly to things you wouldn't otherwise buy them, such as a treat from the ice cream truck or a toy at the mall. Requiring children to spend some of their own money teaches them to set priorities.

Teach children about saving. If your child asks you for an advance on their allowance, or a loan, because they want something that costs more than they have, it is an opportunity to talk to them about saving for such occasions, and maybe starting a bank account. If running out of money and asking for advances becomes a pattern, it is time to let them learn from the consequences. Don't bail them out and reinforce a bad habit.

Encourage employment. At some point, allowances should end and children should get a job. A natural point for this transition is when they get a driver's license, since they now have a way to get to work. Don't nag them to get a job. Just stop giving them money for anything except necessities, and let them discover for themselves why a job is a good idea.