For younger kids, short-term results are very important. They need to understand the correlation between saving and spending. Hopefully as they get older, they are able to wait longer and longer to receive the payoff for their hard work. One major issue in the lives of teenagers and adults in America is delayed gratification. That’s why our nation’s credit card debt is out of control, why there are many people who can’t pay their light bill but still have an iPhone. Teaching kids self-control is a difficult task, but one that is essential for their success as adults.

There are two different types of saving lessons our kids need to learn: Saving for something and saving just to save. Both are valuable lessons. Younger guys have a more difficult time understanding the second one, so obviously those lessons need to be age-appropriate.

Saving for Something
This one has become automatic for our kids. On “pay day,” we break up their money into smaller bills. They are required to divide their money into give, save, and spend envelopes. They always have something they want to save for, so we’ve tried a variety of techniques to help them keep track of how much money they are saving and how close they are to achieving their goal. (Most of these are very visual – posters, thermometers, all kinds of charts.) Celebrating their achievement of that goal makes it even more meaningful when they can finally enjoy all of their hard work.

As our kids have gotten older, though, we’ve seen that they need an additional lesson. Kids need to learn to save for the future, not just just for a specific item.

Saving for the Future
So what is the best way to teach kids to save for the future? I don’t think there’s one right way that will work for everyone, but here’s what we’ve done. We opened a savings account for my son when he turned 10. We tried to make it a milestone (something the other kids could look forward to when they turned that age). He went to the bank with us to open the account, and they put his name on it. When he gets money for anything, he now has four categories to put his money into: long-term save, short-term save, give, and spend. (He still ends up having approximately the same amount of money as his siblings because we pay him a little more for the work he does around the house.) As he’s seen the balance in that account grow, he’s been more motivated to put money away. It’s also given him the chance to learn about a checkbook register, how to keep track of what you’ve put in the bank, and several other valuable financial lessons.

I’ve done a small amount of research into ING Savings Accounts for Kids and that is something we are considering as his balance grows. (In school, he’s starting to learn about percentages and higher numbers, so it might be a good time to introduce some investing concepts.)

This website lists software specifically for kids to learn how to keep track of their money and budget. I’m researching some of these products as well.

Bottom line – it’s our job as parents to teach our kids to handle money. We want them to be productive adults and to not repeat our mistakes. Hopefully being open with them about those mistakes and teaching them practical saving and spending habits will allow them to be better off as they enter adulthood.

Is it a bad (or good) idea for me to help him get a job by making a couple of phone calls?

I’m leaning towards helping him. Why? Because he’s a good kid and I know he’ll do a good job when given a chance. Also, from a store manager’s point of view, it might be nice to hire the kid of someone you know well because you know that the parent is going to hold their kid to a higher standard.

I’d like to know your thoughts.

The avenues that children have to earn money are very limited, and every parent has a slightly different philosophy about how their children should earn money. Here are the pros and cons of some common ways cash finds it’s way into the little pockets of our kids:

Grandma
Birthdays, Christmas, Granmda sneaking money to the kids when you’re not looking. Sometimes kids just get gifts. Obviously this doesn’t teach them about earning money, but it’s a good opportunity to teach kids about generosity and gratitude. (Please teach your kids to write thank-you notes. It’s worth it.)

Allowance
Lots of parents give their kids an allowance – a certain amount of money each week to spend. An allowance implies that they receive the money no matter what – they haven’t necessarily “earned” it. Often kids are required to do chores and contribute to the household, but the two things may not seem related – especially to very young children.

One positive thing about giving kids an allowance is that they know how much money they’re going to have and when they’re going to have it. I think that can teach some good planning habits in older children and teens.

Commissions
According to Dave Ramsey, a better way to teach your kids to handle money is by giving them comissions for the work they do. They are earning each penny by doing work. (They can also lose money when mom or dad has to do their chores for them.) This is a good way to teach kids that money and work go hand in hand. It also helps them feel like a contributing and profitable part of the family.

The downside here is that the amount of money the kids get may vary from week to week. It can also be more difficult to manage than a weekly allowance.

We use the Chore Pad app on the iPad to track what our kids have earned. Each chore is assigned a value and rewards can be customized to fit your family and your kids. Highly recommended.

Entreprenuership
Kids can be very creative. Ours recently decided they needed money for a new video game. They gathered all the toys they no longer play with, wrote signs on construction paper and taped them to fences around the neighborhood (made the neighbors very happy, I’m sure). Then they sat in the driveway waiting for people to come buy their used toys. They were frustrated no one wanted to pay $5 for the broken remote control car, but this was an excellent teaching moment.

Sometimes kids can work for others outside of their home in order to earn money. Grandparents are a great place to practice (and are usually very generous). I love watching the creativity in our kids when we give them the chance to come up with their own ideas.

Especially in our affluent society, kids need to learn that there are things in life that you have to work for. The more successful we as parents are, the harder we will have to work at making sure our kids don’t grow up feeling arrogant and privileged.

Teaching kids how to earn money isn’t the same thing as actually training them to get out there and do it! Parents should require their children to earn their own money for some things that they want. Many parents buy their kids everything they want, but I think it’s important for children and teenagers to feel the pain of not being able to “afford” something – until they work to earn the money themselves.

My personal opinion (currently) is that the commission format works best for younger children, while you’re teaching the correlation between work and money. As they get older, I think kids need the consistency of knowing how much money they’re going to get. That’s what we’re currently doing and it seems to be working for our kids. Every family is different, though, and it’s up to the parents to decide what works best for their kids.

How do you teach your kids about earning money?

As parents, we know our job is to train our kids. We teach them to behave in public, to study and get good grades, to contribute to society. One area we sometimes neglect is teaching them about money. I’ve identified four main areas that I want to teach my kids about money: Earning, Saving, Giving, and Spending. (As they grow, they need to learn about long-term planning, investing, borrowing – more complicated financial issues – but until they have these basics down, the more complicated ideas won’t have any meaning for them.)

Since it’s been the primary thought on my mind recently, I decided to tackle the “spending” category first: We need to teach our kids how to spend money.

It sounds silly to say we need to teach our kids to “spend.” That should be the easy one, right? What they need to learn is how to spend money wisely – so they can feel confident about what they’ve bought, enjoy their purchases, and avoid problems down the road.

There are many methods to do this, and many mistakes to be made along the way. A major mistake that I find myself making is continually telling my kids not to spend money: “That toy is cheap, it won’t last.” “Those shoes are too expensive.” “No, the baseball card that your brother is trying to sell you is NOT worth $10.” Sometimes I forget to teach my kids how they should spend their money: how to look for a good deal, save money for a goal, and enjoy the purchase.

Children have a pretty limited avenue from which they get money – that deserves a whole post on it’s own. Suffice it to say that, since they have such a limited income, it’s a good time for them to learn how to carefully spend that money – before they are dealing with larger amounts of money and making bigger decisions. (Small decisions can equal small successes – or small mistakes. Big decisions can equal big successes – or even bigger mistakes.) If they learn these lessons now, they will be better money managers as teenagers and adults.

In our family, we teach our kids to give and save before they spend. After those two things have been done, they’re free to spend the balance of their money as they will. This is difficult for Mom and Dad! We generally do NOT like the stuff they choose to spend their money on! For example, they LOVE the silly arcade machines at our local Pizza Hut. Every time we eat there (which is not very often), they get out all their money and see how many games they can play. It really bothers me to see them waste their money like this, but I have to keep reminding myself that they’re children – they have childish desires. I go ahead and let them spend some of their money on it. (I don’t, however, let them spend tons of money – which isn’t usually a problem because they rarely have tons of money.)

They also like to spend their money at the concession stand during baseball season. This is a combination of the opportunity to get candy and soda AND just plain boredom. (If you’ve ever been to a 6 year-old’s Little League game, you know exactly what I’m talking about.) Our kids keep the Little League concession stand in business from March to May.

They have learned some hard lessons, and some good ones. Seeing a sibling buy a $180 iPod can be difficult for a younger child to handle.  They have to be reminded that they can have one, too – but only if they don’t spend their money at Pizza Hut and the ball field. The “instant gratification” desire of a 6 year-old doesn’t just go away on it’s own. It has to be disciplined – sometimes through painful experiences.

As a Mom, my initial reaction to any of those painful experiences is to fix it for my kids. But when I step in, I take away the opportunity for my children to learn an important lesson: If you spend your money on one thing, you won’t have it to spend on another.

A few things we have tried over the years that have worked for us:

Take Advantage of Short Attention Spans

There are lots of things that kids want right now.  If you can wait them out long enough, they often forget about them.  One thing I do with my kids is try to subtly divert their attention from that thing they want to what they would enjoy about having it.  When my son says, “I want those blendy pens from television,” I’ll ask him, “What would you do with them?” We start a conversation about the things he would color, what he could create, the fact that he could not, in fact, color the walls in his room, and before long he’s completely forgotten about the original thing he wanted. He’s caught up in the fun of imagining and creating.

Let Them Dream

It’s hard for a kid to go to a store and not be able to take anything home. (Sometimes it’s hard for adults, too…) Kids don’t understand “We’re just shopping.”  In the middle of one particularly stressful shopping experience, I pulled out my phone and started snapping pictures of everything they said they wanted.  Every time they said, “Can we have that?” I took a picture of it.  Without me saying anything (no lecturing, no fussing), the kids’ attitudes quickly changed from, “Mom, can I have…?” to “Mom, take a picture of this one!” When we got home, we looked through all of the pictures, and they enjoyed imagining what they would do with them.  We didn’t buy any toys that day, and no one cared.

Teach Them About Amazon.com

This is obviously not appropriate for all ages, but my 10-year-old is starting to understand that you can buy things on the internet – and you might be able to find a better deal! He’s learning to research his purchase online before going to the store. I’m also trying to remind him, when we’re shopping, that we can check Amazon when we get home to see if we can find the item for a better price.  (My phone also has the Amazon “Flow” app, and we can often check the price on Amazon right from the store.)

This serves two purposes: It’s teaching him to find the best deal on what he wants, and it’s also teaching him delayed gratification.

My husband & I learned some of these lessons too late, and we are having to work very hard to recover from bad decisions. My hope is that our kids will grow up with more information, and more practical understanding, about fiances so that they can make better decisions from the start.

Obviously, my kids are younger. If you have older kids, what have you done to teach your kids about finances? What worked – and what didn’t?

Kids listen. We don’t always think they do, but they pick up on a lot. Getting out of debt has been a major conversation in our house recently, and our kids have had quite a bit to say about it. When we made the decision to get out of debt in 2012, we didn’t even think about what we should tell the kids. It quickly became obvious that the changes in our lifestyle were going to affect them, though – so we decided it was only fair to warn them what was coming.

We are trying to balance giving them enough information without worrying or overhwleming them. Our kids’ ages range from 10 to 1, so the information we give our oldest is drastically different from what we give our 4 year old. Here are a few things we have learned about talking to our kids about debt.

Kids Remember What You Say
Last month, we spent a lot of time explaining to our kids that they couldn’t include everything they saw on TV on their Christmas lists. I finally capped their lists at 5 items each – if they wanted to add something to the list, they had to take something off first. I made this “rule” in early November, and over a month later my six year-old was debating what he was going to remove from his list in order to put “Longhorn Pillow Pet” on it. This was a good reminder: even when it doesn’t seem like they’re listening, they are - and they will remember it!  (And don’t say anything you don’t want repeated…)

Kids Believe What You Say
We had a family meeting to tell the kids a little bit about our plan to get out of debt. One of the things we were preparing them for was a more “restrained” Christmas.  We told them that they would only be getting one present from Santa and one present from Mom & Dad on Christmas morning. (Their brains translated that to, “You’re only getting one gift, so you’d better make it a good one!”) I expected them to have major trouble with it, but several times they have told me, “Mommy, for the one present I’m getting from you…” as though this was the way we had always done it.

In fact, they had much less trouble with the idea than I did!  While I was shopping, I would start to think, “Oh, one more little present won’t hurt anything…” It was very difficult for me to stick with this decision and resist the temptation to spend more money than we had budgeted. Kids have a much greater capacity to adapt than we think they do. We often underestimate them, but they have an easier time with it than we do.

Kids Will Hold You Accountable
“No going out to eat.” This was Rule No. 1 that we told the kids about in our Family Meeting. They whined a little bit, but ultimately understood, and they rarely asked to go out to eat afterwards. One evening, however, several out-of-town family members decided to get together at Chili’s and we decided to meet them. As we’re leaving, my precociuos 6 year old reminded me, “I thought you wanted to get out of debt!”  Talk about a kick in the stomach! Once they understand the “rule,” they rarely understand that there can be exceptions. They may need that word explained to them. (Of course, if they see Mom and Dad breaking the rules repeatedly, they will quickly learn that it wasn’t really a rule to begin with.)

So what do your children need to hear and understand about getting out of debt?

I believe they need to understand how the debt got there in the first place, why it’s a problem, and what your plan is to fix it. Without understanding where the debt came from, they won’t know why it’s a problem. Explaining this on a kids’ level can be difficult. We have had to talk about borrowing money and why that’s not a good idea. We’ve tried to explain what interest is, but that is difficult to do with young kids, too. Here is how we finally explained it to our kids:

When you borrow money from the bank, you have to pay it back to them. When you pay it back, you also have to give them some extra money. That’s called “interest.” So it’s like borrowing $10, and having to pay back $15.

For some reason, when we explain debt to our kids, it starts to sound really dumb. They look at you with expressions that say, “Why would anyone want to do that?” And we ask ourselves the same question.

Explaining why debt is a problem is less of a challenge. “We can’t go out to eat because we have to pay our credit card bills,” will usually suffice. But we’ve also tried to explain some of the emotional and spiritual aspects of debt. We want them to understand that learning to wait for what you want, and save for it, will allow you to value your money, your time, and your possessions more. We don’t want them to take for granted the things that they have. According to James A. Roberts in Shiny Objects: Why We Spend Money We Don’t Have in Search of Happiness We Can’t Buy, “When we use credit cards, we make quicker purchasing decisions, are more likely to buy, and are willing to pay more.” I want my children to make less emotional decisions and understand what it means to work hard and save hard, and truly enjoy the things that they buy with their hard-earned money.

Finally, kids need to understand that you have a plan. This is the part that will keep them from worrying. As I said before, kids have an amazing ability to adapt to change. When we laid out for them the things that we are changing in order to get out of debt, our kids immediately got on board. Without a plan, however, kids will remain unsettled, worried about the future and how things will turn out. (Even with a plan, there will be some of those doubts to contend with. We were recently given a gift card to a restaurant and took the kids out to eat. On the way out of the restaurant, my son asked, “Does that mean we added money to our debt?” He was so worried we had to stop right there and explain.)

Experiencing the consequences of our actions are never fun. But it is my hope that we can use this time in our family’s life not only to learn from our own mistakes, but also to teach our kids how to avoid those mistakes. Talking to them about our debt is a first step.

What information do you give your kids about your finances? How much is “too much” information?

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Catherine and David Cook started myYearbook.com in 2005 when they were 15 and 16 years old, respectively, as a way to connect with their new classmates at Montgomery High School in Skillman, N.J.

Big brother Geoff Cook, then 26 years old, bankrolled the start-up with $250,000 he had made from selling an online-resume business he built as a Harvard University student.

On Wednesday, Geoff Cook, now the 33-year-old chief executive of myYearbook.com, announced the sale of the company to Quepasa Corp., a social network aimed at Latinos.

All it takes is a good idea, money, and proper execution. Pretty simple, don’t you think?

Of course it’s not that simple or we’d all be rich. But, this story does make me want to spend some time talking about entrepreneurship with my three kids.

The last column represents the sales growth for that particular sector.

Anyway, this is something you might want to show your college-bound kids.

As a parent, I hope my kids understand the importance of budgeting BEFORE they go to college.

I also hope that I will do a good job at helping my kids understand the importance of saving money for an emergency fund, down payment on a house, future purchases, and retirement.

Being financially responsible is basically a lifestyle choice. I understand a college grad’s desire to spend their money on a new car and a fancy apartment but if you can get through to them BEFORE they waste their money on such things, they will thank you when they are thirty.