1. Money is an exhaustible resource. When you use it, it’s gone. Make smart choices about how you use it. That means realizing that when you spend your twoonie on a popsicle, you forgo the can of pop or bag of chips.

2. Save something. There’s no lesson that will teach this better than the lesson of habit. You make your kids brush their teeth, right? Make them save too. Saving 10% is enough. It’s a hard habit to break and one from which they’ll reap huge benefits.

3. More money doesn’t make you a better person. Some adults would do well to learn this lesson. The amount of money you have has nothing to do with the content of your character. The kinds of shoes you wear, the brand on your clothes, the type of car your parents drive, the size of your house all have nothing to do with how smart, sensible, kind or fair you are.

4. If you want more money, get creative. Entrepreneurs are born from the desire to be in control and make things happen. Encourage your kids to set up lemonade stands, wash cars, walk dogs, deliver papers, fetch groceries, weed gardens, shovel snow. Don’t insist they save half. (Do you save half?) Apply the normal savings rules.

5. Make wise choices about what you do with your money. This requires that you give them some: that’s called an allowance. It’s not free money. It’s the money you normally spend on them, put in their hands so they can learn how to make wise choices. Over time they’ll learn that if they blow their money on crap then they won’t have it when they really want it. Once you start an allowance, keep your hands out of your wallets.

Are you giving your kids an allowance? And what kind of example are you setting –what lessons are you teaching — as you go about your day-to-day life?

The job jar is a way to get kids working for money above and beyond the allowance you’re giving. You would create a list of jobs you need done and an amount you’d be willing to pay for each job. (It doesn’t have to be a jar; it can be a list on the fridge, for example.) So, maybe you no longer want to clean the kitty litter and for that you’d be willing to pay $10 a week. As long as the job is done, you pay at the end of the week. Or you need the grass cut, and you’d be willing to pay $20. When the grass is cut, you pay up. Ditto loads of laundry, vacuuming, meal prep, weeding, bathroom cleaning, garbage collecting, dog bathing, garage cleaning, car washing…the list can go on forever… anything you wish someone else would do. Create the list of jobs you’re willing to pay for (this should not be the things they normally have to do as chores because they belong to the family and have responsibilities around the house) and post the list or cut it up and let kids pull it out of a jar for a more random experience.

As for as helping your son plan his spending, get him to commit to something he wants that will take a few weeks’ worth of money and make up a chart with a picture of the thing he wants. Then draw on boxes that represent the money he’ll save each week. So if he wants a new game for this DS, that game might cost $40. If he’s planning to save $5 a week, you would draw on 8 boxes (40÷5). Then each week as he sets aside his $5 (in a jar?) he can check off one of his boxes.

Jen wrote: On your show, you often recommend giving little kids $2 to buy 2 things at the dollar store.  I think it’s a terrific idea because they have to learn to prioritize.  My question is about dealing with sales tax.  In Ontario, one item at a dollar store would actually cost $1.13, and two would cost $2.26.  Would you still give them the $2 but say “you can only pick one item (or spend $1.50 if you can find something for 50 cents)” or would you give them $2.30 initially?  Or, would you let them pick two items and then wait until they get to the register to find out they might have to put one back? (I can hear the tantrum as I type that!) I think tax is something that people (including myself) forget to budget for.  I taught a personal finance course where we had a budget project; some students forgot to account for deductions and sales tax and very quickly found themselves in a deep hole.

I certainly wouldn’t let them find out at the cash register. I’m a big believer in kids succeeding and that would be a failure. Tax is not usually something that very little kids — dollar store shoppers — can wrap their heads around. If you want to introduce the idea of tax, then I would point out the tax I pay when I shop. Since they likely can’t do the multiplication to figure tax out, this would just be an FYI discussion. As they get older and develop the skills to do the math, I’d ask them to calculate the tax on various items I was purchasing so the point would be brought home even further.

As for shopping at the dollar store, let them choose two things and you cover the tax… but point it out to them. “Hey, there’s that tax again. When you’re 10 and can do multiplication, you’ll be able to figure that tax out for yourself.” Something to look forward to!

Calie wrote: I was brought up by parents who didn’t believe kids and money mixed. Family finances were never discussed in front of me. I would love to get some more info on children and money. My four kids (13,11,9,7) have their own saving accounts, however, I have control over these accounts. At what point do I let them control their own money? Is it a good idea to give your teen a credit card (a very small amount of course) so that they learn early on in life on how it all works?

Loads of parents wonder a what point do let their kids control their own money? ?As far as I’m concerned, from the very beginning. If kids don’t have control over their money, it’s not their money, it’s yours and you’re just playing a game. Your job as a parent is to set some expectations, and then take the opportunities to teach the lessons that come from the natural consequences.

As for the idea of giving your teen a credit card so that they learn early on in life on how it all works, it’s a good idea. I’d start young kids (age 12+) out with a credit card on the Bank of Mom. You charge the item for them, you issue them a “statement”, they have to pay you on time or you charge interest and/or repossess their stuff. Later – I believe they have to be 19 — you help them get a credit card with a really low limit so they can build some real experience.

Charlene wrote: You often give percentages for what people should be spending on things like housing and transportation. How much of your income should go towards your child’s extra curricular (e.g., music lessons, figure skating lessons)?

As much as you want and can afford. I don’t think it’s any of my business to tell people how to spend their money. My thing is that people have a balanced financial life, covering all the bases, and not going into debt for crap. As long as you have no consumer debt, are setting aside some money for savings, and are living on a balanced budget, if you want to spend all the extra money that available on your child’s extracurricular activities, have a blast.

Donna wrote: Gail, we’ve successfully implemented the kids’ allowances using the 3 jars (spending, sharing, & long term saving). Our 11 & 7 year olds just love it! Now the question is where should we put the “savings” portion? They only get a penny a month interest while it’s sitting in our bank’s savings account. Where’s the best spot for these kids to leave their money for the next 10-15 years? Thanks!

Have you tried ING?  I believe they were offering a bonus for new chidlren’s accounts. And whatever they pay, it’ll be better than you can get at a bricks-and-mortar bank. Once my daughter had accumulated $1,000 we switched to using GICs. Eventually, when she goes to work, I’m going to have her put the money in her RRSP, and invest it as part of that long-term portfolio.

Helping kids create expectations you can manage is an important part of learning about how to make the most of what you have, as opposed to always wanting more, More, MORE. Suggest your kids make a list of four or five things they’d like as gifts. Make it clear that it isn’t your intent to buy everything on the list, but they’ll get at least one or two things. Now your children know what they can expect and it isn’t the world. And you can create a shopping list that fits within your budget.

Toys and electronics are often at the top of kids’ lists and tend to be big money-eaters. But there’s no need to hit a fancy toy store or high-priced electronics store to make magic. Your little mites won’t wonder how much you paid for that bucketful of Lego you found at the garage sale. And who cares if Barbie doesn’t come in a fancy package if she does comes with a boxful of clothes, all from a local toy-trade.  Many electronic stores have refurbished options that are a fraction of the cost of buying new. Shopping smart leaves you room in your holiday or birthday budget for the little extras that will make the day special.

During the year you can establish your own toy-trade to keep your kids’ toy-chests fresh and interesting. Meet once a month for a play-date with a few friends and each bring five toys you’re prepared to trade. Now your kids have new, interesting playthings that didn’t tap your budget.

Clothing is another of those kid categories where you can blow a fortune or save big-time. Second-hand and thrift shops are great places to score brand name clothes in good condition. But whether you’re Christmas shopping or getting ready for back-to-school, first, start with a list.

Keep an inventory of what your kids have and what they will soon need so you’re in a position to spot a bargain as you’re browsing. If you come across a great deal and it isn’t on your list, walk away unless you have plenty of money to spare. With kids growing at record speed, it’s unlikely that the clothes you buy will wear out before they are out-grown. Taking your child’s used clothes to a second-hand store is a great way to build up credits for when you need to get Little Missy a new leotard for dance class.

I have 2 more e-copies of Money-Smart Kids to give away today. All you have to do is
leave a comment on this blog telling me the worst example your parents ever set for you about money. Two names will be chosen at random.

1. Don’t try to do too much at once. Over-scheduling kids lives doesn’t make them happier. Kids need down time to just hang, think, imagine, process, cope. And jamming a whole bunch of money lessons into a day, week or month won’t work either since time is important for practicing and processing. Here’s a line from a Joanie Mitchell song (or was it Joan Baez?)… “Take your time or time takes you and drains your soul away.”

2. Prepare your kids. Telling your kids what you’re going to do helps them create a mind-map of what’s going to happen. Ditto teaching them about money.  Lay out what you’ll be teaching them before you get into the actual lesson so they know what to expect. If you’re going to teach about allowances, tell them you’re not going to get into loans, advances, work for pay or all the other stuff that can make the discussion really complicated, you’re just going to be talking about how much, how often, and what they can do with their money.

3. Be prepared. Just as you wouldn’t dream of heading out without a bag of clean-up stuff and a set of nibblies to hold hunger at bay, you also have to be prepared when you’re teaching kids about money. Don’t trying giving a kid her $7 in allowance using a five and two loonies. How will she put away her 70¢ for saving, or divvy up money between her Planned Spending (for that new DVD) and her Mad Money?

4. Routine is your friend. Keep switching the day when you give the allowance and watch your kid eye you suspiciously. Forget to give the allowance and you’ll prove you’re not trustworthy. Change the rules on how the allowance can be used based on every new situation and you’ll teach your kids you’re a scatterbrain.

5. Know when to let go. It’s not worth all the hassle to get on your kids’ cases about everything. Know when to let things go and just relax. As long as you deliver a consistent message, love them and have their best interest at heart, they’ll turn out fine. If you’re doing anything “because of the principal of the thing”, it’s because you’re too lazy to weigh each decision on its own merit.

When it comes to teaching your kids about money, remember:

1. They’re always watching you. You know that old say, “Do as I say, not as I do”? Well, kids learn from what you do. Shop without a list and they’ll learn that when you go into a store it’s to impulse shop.

2. It’s just as easy to learn bad habits as good ones. Browsing serves a purpose. Unfortunately, in our time-pressured world, we haul our kids in and out of stores, seemingly without purpose, always buying something. If you never leave a store without buying SOMETHING, your kids will quickly learn that their purpose in going into a store is to find something to buy. You can’t then turn around and say, “Do you think we always have to buy something?” because the answer is, “Yes.”  That’s what you’ve taught them. Bad habit. And all because you don’t follow the next rule, which is…

3. Explain everything you’re doing. Yes, it can become tedious, so it doesn’t have to be EVERYTHING, just most things. You can’t take cash from a cash machine without explaining how it works or your kids will think, “The machine just gives you money.” You can’t write a cheque without explaining how it works or kids with think, “cheques are money.” You can’t leave a tip on a table without explaining what you’re doing or your kids will think ,“Mommy forgot money on the table, I better pick it up.”

4. What goes around, comes around. If you’re truthful with your children, you have the right to expect the same from them. But if you lie, obfuscate, and only tell part of the story, why would you expect any less from them. Remember rule numbers 1 and 2? Hmmm.

5. Keep it simple. The more complicated you make something, the harder it is to deal with. Complicated outfits mean kids will get it wrong and look dumb. Simple colour combinations help them get it right.  Complicated rules for how kids can get and use their money are hard to understand and keep straight.  That why the Magic Jars work so well (for both kids and adults); the system is simple to understand and use.

Have you joined School Lenders on Facebook yet? Have your sent your letter off to your member of parliament? What are you waiting for?

Mistake #3: If you don’t make your bed you won’t get your allowance this week. Who pays you to do the chores in your home? Chores are a part of each individual’s responsibility to the family. Payment for regular chores negates a child’s individual responsibility as a member of the family unit. Payment for extra household tasks – those above and beyond a child’s normal chores – is fine when they are specifically doing the task to earn some money.

The biggest problem in tying your child’s allowance to the completion of her chores comes on the day when you must withdraw the allowance. Now you’re teaching your child, “I have the money and you’ll have to do as I say to get some of it!” That’s a straight-out power play. “I have the money, so I have the power.” Ouch, not a lesson you should want your kids to learn.

A far better tack for children who don’t follow through on household responsibilities is to do a like-for-like comparison. “Hunny Bunny, if you don’t make your bed, I’m going to have to. And I only have time to do one thing, make your bed or make your lunch. Which one do you want to do?”

Or how about: “Sweetheart, we don’t always feel like doing our chores, but what if I didn’t feel like driving you to soccer, should I just say ‘take a hike’?”

So back to the big question: Why are you giving your kids an allowance?

To learn how to manage money responsibly, children need an income they can rely on – one given at regular intervals and in denominations they can manage. The experience of handling a steady flow of cash will teach many fundamental skills, including how to manage a cash flow, how to plan ahead, setting goals and how to save to satisfy a goal. With your guidance, an allowance can also be used to teach important lessons in borrowing and lending, the pleasure derived from generosity, and how to be a good consumer.

The strings attached to money you got as a child will have a strong impact on the strings you attach to your children’s money. Perhaps you were never given an allowance and had to work for every penny you got. If you had to put yourself through college or university working at the local carwash on weekends, and waiting tables at night, this will no doubt colour the way you look at money in general. If your allowance was tied to chores, or you were required to save all the money received as gifts, you may see that as the “normal way to do things”.

Whatever your own experiences with money as a child, put them aside as you begin to teach your children how money works and the role it should play in their lives. To ensure money is not imbued with meanings it should not have, don’t tie things like self-esteem, power or love to money. Stay balanced when you talk about it. And, above all, figure out what message you want your children to take away from your money lessons. Like it or not, they are learning from you. What lessons are you teaching?

From early on children receive mixed messages about money. They watch us spend money in so many forms and for so many reasons they form their own twisted and delusional ideas about the purpose and use of money. And if mom and dad are fighting about money, well, that brings it’s own lessons. They’re eager to soak up any direction a parent will give in terms of the role money will play in their lives. And if you point them in the wrong direction, they won’t know. They’ll just follow your directions to money hell.

Mistake #1: If you don’t smarten up, I’ll cut off your allowance! Money doesn’t work as a reward for good behaviour. Just ask any of the management theorists who have proven that money is not a motivator for adults. So why should it be for children? Good behaviour is based on an understanding of right and wrong, thoughtfulness, caring and consideration, along with myriad other positive attributes, all of which have to be internalized. When you tie money to behaviour you’re sending the message that compliance is the way to get money. All well and good if you want your little ant to know her place in the corporate hierarchy later on. But if you want a child who grows to be a confident and creative adult, compliance isn’t the lesson you want to teach at home. And money shouldn’t be your two-by-four.

Mistake #2: I’ll give you $20 for every A you get on your report card. Good grades are your child’s responsibility. School is his primary job, and good grades are an indication that he is doing his job well. If you provide financial reward for good grades, you are externalizing the reward. Instead, the reward should be internalized: the self-esteem and pride that accompanies having done well.

Get a social insurance number for your wee one. You can’t open an RESP without one. Even if you don’t imagine you’ll have money to stash away for baby right off the bat, you should get a SIN card. For lower income Canadians, the Canada Learning Bond is available to help you save for your children’s future. It may not be a lot, but why wouldn’t you take advantage of free money if you’re struggling on your own.

Several provinces (Alberta, British Columbia, Ontario, Nova Scotia and Québec) let you use their Newborn Registration Service to complete your child’s Birth Registration and apply for your child’s SIN card. Elsewhere take your application and baby’s birth certificate to your nearest Service Canada Centre. If everything is in order, you’ll get a Social Insurance Number in one visit and receive your baby’s card within about 10 business days. Can’t get to a centre? Then apply by registered mail.

Apply for all the tax benefits you can get. Why would you walk away from any financial break you can get? Make sure you apply for the Universal Child Care Benefit (UCCB), which will give you up to $100 a month for each of your children under the age of six. (Careful, this money is taxable in the hands of the lower-income partner.) Also check out the Canada Child Tax Benefit (CCTB), which is aimed at low- and middle-income families. The amount you may receive is based on how many kids you have, their ages, your family income, and your childcare expenses. Paid monthly, these benefits aren’t taxable.

If you have a family income of $25K, two kids, and receive no other benefits, you’re looking at a benefit somewhere in the vicinity of about $680 a month. At $30K your benefit would be about $550. At $35K, it would be about $420. And at $40K it would be about $290.

Remember, too, that you can deduct childcare expenses from your income when you’re filling out your tax return. Keep your receipts. As an example, for 2010 you could deduct the LESSER of the amount on your receipts or $7,000 for each kid under age 7, and $4,000 for each kid over 7 but under 16 at any time in the year. If you had a child who was eligible for the disability tax credit, you cold claim a maximum of $10,000 per child for childcare expenses.

Open up an RESP. Not everyone feels the need to help their children save for their future, but if you want to help your kid graduate from post-secondary school without a ton of debt, an RESP is the way to do it since each child can earn up to $7,200 in grant money absolutely free. Can’t find the money in your cash flow to come up with $50 or $100 a month for an RESP. Why not change your withholding tax amount to put more money into your cash flow.

Update your will. Now that you’ve got a babe, you need to update how you want your assets handled if you croak. Skipping this step is just plain irresponsible. While you’re at it…

Name a guardian. This can be a tough step emotionally. Who would be good enough to raise your child? And it’s not to say that once you name a guardian it’s a done deal. The courts actually decide. But if you don’t take this step they’ll have nothing to work with when they are making the decision so your kid might be “given” to someone you loathe.

Review your insurance. If you don’t have any, it’s time to get some. If you have some but you’re not sure it’s enough now that you have more than yourself to be responsible for, check with an insurance specialist. It’s also a good time to review the beneficiary designation on your insurance policies, as well as on things like your RRSP. Please, resist the urge to buy life insurance on your children unless your intent is to guarantee future insurability because you have certain types of diseases in your family.

Update your budget. Formula, diapers and daycare of a way of taking a big bite out of your budget. Try to keep living as you did before baby came along and you’ll find yourself turning to your credit cards and lines of credit to fill the gap. This is not time to be going into debt for dumb stuff. You’ve got a baby now. This can be a particularly trying thing to do if you’re living on significantly less money now that you’re on maternity or parental leave. But ignoring your smaller income and pretending that everything will be fine is imprudent.

Do as I Say, Not as I Do: If you tell your kids to save, but you don’t save, the mixed message is confusing for children. If you tell your children not to impulse shop, but you never walk into a store with a list that they can see, how do they know you’re not impulse shopping? What you DO has way more long-term impact on your kids than what you SAY. So you’ve got to be walking the talk.

If your money is a mess, then look at your babies and decide today is the day you clean up the confusion so that you can start being for you children what you want them to be for themselves. Being smart about money is more about discipline than it is about book-learnin’. Sure, there are some sophisticated concepts in money management, but the basics are plain ol’ common sense.

Practice what you’re preaching and you will have way more authority than if you say one thing and then do another. If you’re always struggling to get things to come out even, you’ll make money management look hard. If you have a system in place and you’re disciplined about what you do with your money, you’ll make money management look like a skill.

Silence is Golden: This is perhaps the biggest mistake you can make when it comes to kids learning about money. If you don’t talk about money in your family, you’re sending a message. Maybe you’re saying, “I’m embarrassed about what I don’t know.” Maybe you’re saying, “I feel stupid about money, so I’d rather not mention it.” Or maybe you’re saying, “Money isn’t important enough to talk about.” Your children are hearing you loud and clear.

People who are uncomfortable talking about money want to unload the yucky job on someone else: teachers should do this; schools should have a curriculum; the bank should teach you what you need to know

Wake up! The bank’s in business to make money. Schools have enough to work into the curriculum without picking up your slack. And as for teachers… they’re just people. They’re no more or less financially savvy than the rest of y’all. (Have you seen how many teachers I’ve had on TDDUP!)

The only way to teach children about money is to give them some of the stuff to work with. And you’re the only person who can give your children money. You’re also the best person to see the opportunities to teach money lessons from when your tots are wee to when your teenagers hit the tall and know-it-all stage.

If you have some preconceived notions about teaching kids about money, those notions will influence how you communicate.  How’s that working for you so far? If those notions are getting in the way of teaching good lessons, it’s time to flush away your prejudices and open up your mind to all the opportunities to do thing differently.  Not talking about your money is one of those things you have got to get over!

Today is Day Five of the giveaway of Casssie Howard’s (MrsJanuary.com) Money In Your Pocket, which focuses on saving money on your grocery bills. To enter answer the question of the day in the comments. Today’s question: What do you do to teach your children about money and how it works?

There are lots of things you can do with your kids that cost little or nothing. Pass on the high admission prices at local attractions and go exploring neighbourhood parks with your family. Take advantage of free municipal pools in the summer and the skating rinks in the winter. Visit the local museum or art galleries on free admission nights to introduce your kids to the arts and history.

Being smart on your taxes makes sense too. Some parents struggle with meeting their kids’ needs while staying afloat financially. If you’re a single parent or your family is living on one income make darn sure you’re claiming the eligible dependent amount on your tax return. There are lots of other expenses that may be claimed on your tax return to mitigate your kid-costs.

If you’re paying for a babysitter, daycare, nanny, boarding school or camp, you can very likely claim child-care expenses. The person with the lower net income should make the claim to get the biggest benefit.  Make sure you have the proper receipts with the business information or the personal information and SIN of the child-care provider to make this claim.

If your child participates in any fitness activities – everything from hockey to soccer, swimming to gymnastics – you can claim the child fitness amount of up to $500 per year per child 16 and under. The activity has to be ongoing for a minimum of eight weeks or a camp that is a minimum of five consecutive days.

If you buy a bus pass for your eligibly dependent child, you can claim it on your return. Since the bus pass itself is not a receipt, you’ll need the receipt provided at the time of purchase.

Your kids’ medical expenses form part of your claim for medical costs and there is a long list of approved expenses that include things like prescriptions, eye exams and glasses, and dental work.

If your kids are away at college or university, their tuition may be transferred to you if they don’t have enough income to make the full claim.

Speaking of college and university, your kids’ budget should include a regular amount set aside for educational savings. If you start early, you don’t have to set aside a lot, and each dollar you save can help your child earn grant money if it’s put into a Registered Education Savings Plan (RESP). You’ll need to get your child a social insurance number to make him or her eligible for the federal government’s Canada Education Savings Grant, which pays the equivalent of 20% on the first $2,500 in annual contributions to a child’s RESP.

When shopping for an RESP, make sure you stick with an individual or family plan offered by most financial institutions. Steer clear of the group plans or “scholarship trusts”, which have come under fire for being both expensive and inflexible.

Kids are expensive, no question. When I had my daughter, Alexandra, I had no maternity leave benefits because I was self-employed. I had to have a good nest egg saved to see me through my time off. And after I had my son Malcolm, I was in no position to take gobs of time off work. With a hefty mortgage to pay, my income was essential to our family’s stability. But I could make adaptations. And I did, cutting back on the hours I worked, choosing to work when my children were asleep, and creating a schedule that let me spend as much time as I could with them. We sacrificed fancy furniture and vacations in those early years. And my entertainment was sitting and watching my kids learn about the world.  Those were some of my happiest years. We had a ball together. I shopped garage sales and second-hand stores, shared what I had with friends, and chose one activity at a time for my kids, so they weren’t overwhelmed and I didn’t go broke.

It’s all about the choices we make and about figuring out what’s most important so we can prioritize those choices. Kids don’t arrive in designer labels, and they don’t much care about stuff until someone teaches them to be concerned about what other people think. Avoid that bullet, and you can save yourself a fortune!

You’ll need this book if you’ve been doing either of the following:

1. Practicing Fair-Weather Finance: When the sun in shining on your money, you’re happy to talk about it. You’re generous. You’re less rigorous about watching the pennies. It’s like heading out the door in those early days of spring with less clothes on because it feels so good to be free of coats, boots, scarves, mittens and socks.

Your young’uns will learn all the wrong things from your Sunshine Optimism. If you only talk about money when things are good they get an unbalanced perspective on what their own lives will be like later on: all sunshine and roses. Or they become very confused when the tides turn and you’re suddenly the Money Grouch.

Your financial lessons should be consistently delivered, in good times and bad, so your children see money management in all lights, and challenges as a problem-solving exercise (not doom and gloom). Learning to be creative in coming up with solutions to short-term cash flow problems is one of the best skills you can give your children.

2. Using the Dole System: Some spurts categorically state that you shouldn’t give your kids money without strings… they should work for their money because you work for your money. Hey, wait a sec… aren’t they children? And isn’t the point of an allowance to teach kids how to manage money?

I define an allowance as “the money you normally spend on your child (think of all the times you dip into your wallet to pay for stuff) put in his or her hands so that your child can learn to manage it.” It’s not extra money.

If you don’t give your kids an allowance with expectations on how they’ll use that allowance, you’re using the Dole System. They need something, you dole it out. Need new running shoes…. Dole. Want a bag of chips at the store…. Dole. Hockey stick broke…. Dole. Going to a birthday party… Dole. School supplies…. Dole. Back to school clothes…. Dole. Prom dress…. Dole.

You’ve turned yourself into The Money Tree.

Sure, you want to give your kids all the things that make life fun, teach them skills, and help them develop, but don’t you also want they to learn how to manage money? Put their fun money, their clothing allowance, their school supplies money, and all the other money they end up spending anyway into their hands so they learn to prioritize, make choices and shop smartly. You get what you want. They get what they want. AND they learn that money is an exhaustible resource and they have to manage it carefully. Win-win-win!

If you’re worried that commercials are having an undue influence on your children, you’re not alone. But wringing your hands or banishing TV isn’t the answer. Instead, talk to your child about marketing and how often the “promise” and the “reality” differ. Kids need help to see that what’s promised isn’t always what they get. When your child says he wants the latest action figure, ask him if he thinks said figure will move of its own accord. When you take him to the store to buy the product, take it out of the packaging (another buy-me ploy) and ask him if it lives up to his expectations.

Kids need guidance when it comes to distinguishing a sales pitch from television’s non-commercial content. You actually have to teach your kids that advertising exists to sell products, that special effects can exaggerate a toy’s operation, and that the ads don’t always include all the information about a product. I remember the first time Alex and I watched Barbie swimming and I asked, “Do you think she can really do that?” Alex looked up at me, eyes wide and nodded. We had to have a little chat about what is real and what is “salesmanship”, and we’ve been having the talk ever since. My girl has grown up to be a pretty smart (yes, and a little cynical) as a consumer.

The next time you watch TV with your son or daughter, take time to point out the difference between the programs and the advertisements. Talk with your child about the different types of commercials on TV and radio. Watch or listen to several ads together and have your child label the ads.

Wannabe Ads: Beautiful people having scads of fun doing things we would all love to be able to do: rafting, skiing, skateboarding, dancing. Buy the product and you’ll be part of a group of fun-loving, popular achievers.

Famous People Ads: Athletes, movie stars, musicians, famous business people, even politicians appear in ads. The message is if someone famous uses the product, shouldn’t you?

Cozy Ads: These ads depict warm, comfy pictures, usually in an intimate setting. A grandpa and grandson chatting on the telephone or best friends sharing secrets over a tub of ice cream. These ads want you to relate their products to love and contentment.

Facts Ads: Four out of five doctors, six out of seven dentists and nine out of ten mechanics all say this is the best product available. Could all those experts be wrong?

The Great Offer Ads: These offer you a not-to-be-believed, too-good-to-pass-up opportunity to get more for less — eight CDs for a dollar, 12 tapes for a penny, buy two get one free, buy one and the next is half-price.

Once you and your kidlet have labeled the ads, make a game of finding four or five examples of each type of ad. Ask your child:

• Is the product better because a famous person says it is?
• Will you be happier, safer, warmer, cozier, if you buy that product?
• Can you figure out what the product is really like from the ad?
• Is the deal being offered a good deal? Do you know all the facts? Are there any catches?
• Are your buying decisions being influenced without you being aware of it?

Then the next time you’re at the supermarket, ask your child to choose a food product he or she saw advertised. You choose a similar no-name product. When you get home, do a blindfolded taste test so your child can experience firsthand whether the advertised product lives up to its claim.

Given the constant barrage of messages to buy, buy, buy, it’s not surprising that children are the consummate consumer. Maybe it’s time to start making your kids smarter about how they spend their, and your, money.

Younger children find it easier to handle money if they are given a small amount each week. Pick the day you give the allowance carefully. If giving an allowance at the beginning of the weekend means it’s all gone by Monday, then give it on Monday or Wednesday. While you want your child to accept responsibility, young children need some help in developing some patience.

Children who are older and have established many of the habits of budgeting should be asked when and how often they prefer to receive their allowance. While some kids like getting a little money each week, others may prefer a lump sum once a month, allowing them to plan spending for the month.

Whatever allowance schedule you establish, stick to it. It’s demeaning for anyone to have to constantly ask for money. And providing the allowance on time will send a subtle message about the value of honoring commitments.

The first time most kids learn about credit is when they go off to university and credit card companies start throwing cards at them. With no experience and very little understanding of the long-term negative ramifications, kids start to charge. And they charge, charge, charge until they’re in a hole. Have you ever taken the time when you were using your credit card to purchase gas or pay for a new pair of shoes to explain how credit cards work? Have you explained that you’re only putting on the card what you can afford to pay for when the bill arrives?

Discussing the importance of a good credit history and how a bad one can get in the way of future borrowing, whether they need to buy a car, rent an apartment or get a mortgage for a house is an important part of helping kids understand money. (Most teenagers don’t realize that some cell phone companies report to the credit bureau and how they handling their cell phone bills can totally bugger up their ability to borrow in the future.) Don’t pass up those opportunities that naturally present themselves to talk about money, the various ways we can use it (cheques, debit cards, credit cards, and cash), and the pros and cons of each.

Credit cards can be useful tools, but they should never be used to eliminate the need to plan our spending. Most of us are all too aware of the “see it, want it, gotta have it now” attitude. Lots of parents are happy to demonstrate it for their kids, so it’s no wonder kids learn this lesson so well. Even if you are a planner, if you haven’t taken the time to explain this to your kids, all they see is “What Mommy wants Mommy gets!”

Next time your young’un expresses an interest in buying a new doll or yet one more Lego kit, make a chart to help her see how long she has to set aside some of her allowance to get the money for the item. Find a picture that represents the item your child wishes to buy and paste it at the top of the chart. Draw boxes for the number of weeks she will have to save. So if the item costs $10 and she setting aside $2 from her allowance each week, you’ll draw five boxes. Staple an envelope to the chart. Each week when she gets her allowance, she’ll put $2 into the envelope and mark off one of the boxes. This will teach that sometimes it takes time to accumulate the money we need for the things we want. It’ll also help to reinforce the getting there.

People – kids and adults alike — exhaust themselves trying to maintain lifestyles they can’t afford. Whether it is the social pressure to conform or our a sense of entitlement, so many people are willing to put their futures at risk so they can make the right impression. One way to help a child gain some perspective is to talk about what it is they really want in life. I often talk to my teenagers about how important it is to live a worthwhile life: A life that brings challenge and love, that allows you to share, to laugh, and to be happy.

What makes your life worthwhile? And what are the things that your child thinks will make his life worthwhile? Teaching about the details of how to manage money is an important part of your job as a parent. But helping kids put money into perspective is just as important. Whether we realize it or not, we are teaching our children our money skills and values (or lack thereof) every moment they are with us. We can let it happen randomly, or we can take some responsibility for the messages we deliver.

Or we can give up the responsibility to our education system, our financial services system, or our government.  But you’ll be sorry! Don’t say I didn’t warn you.

Over time, as they needed and wanted more money, we broadened the parameters of how they got their paws on more moolah. First there were “work for pay” jobs they could do to make some extra money if they were working towards a particular goal. Then there were the increases in allowance to cover things I wanted them to take responsibility for, like their clothing and school supply shopping. By the time Alex hit 15, she knew all about prioritizing her purchases and the consequence of blowing her wad too fast.

Giving kids an allowance lets them practice spending, banking, and saving. They learn that it’s fine to buy something frivolous but not at the expense of something necessary. They learn that money is a finite resource: it runs out. And that using someone else’s money (borrowing against your allowance) comes with a cost.

But giving kids some money to manage is only one part of the equation. With that money must come expectations, guidelines and loads of talk. And this is the part parents are most afraid of. Having little confidence in our ability to do it right, much less communicate it, we resort to yelling at them when they get it wrong.

Children will make mistakes as they figure out how this new tool works. When they do, if you rant and rave, you’ll win no points as a balanced and open-minded parent.  And your kids won’t learn diddly. Ditto if you can rush in and bail your kid out. You’ll achieve nothing in terms of teaching what may be a very important lesson in consequences. Instead, help your child to determine how he will fix the problem.

If your daughter dents the car, she should not only have to pay for the repair, she should also have to take time from her busy schedule to have the repairs done. If your son spends $200 on a pair of running shoes (when a $50 pair would have been fine), he should have to go without whatever else that money was destined for: a school trip, a special purchase or his next month’s supply of razors. And if your little mite blows all her allowance on candy, and then throws a hissy fit because she wants to buy something else, after she’s cooled off is the perfect time to talk about patience, prioritizing, and how there is only so much money so we have to really think about what we want.

In terms of setting expectations, a big priority should go to establishing a savings habit. Yes, savings is a habit. The people who save do so because they’ve formed the habit. The people who don’t can’t seem to get into the swing because there never seems to be any money left at the end of the month.

One of the golden rules of money management is “Save Ten Percent.” Started at six and encouraged all the way through to adulthood, this habit – like brushing your teeth – can save a lot of pain. Each week when you give the allowance and your child allocates 10% to saving, he is forming a habit that will stand him in good stead for the rest of his life. And when savings become automatic, that’s something of which you can be very proud.

It takes some planning on parents’ parts to make learning to save easy for kids. Think about the denominations in which you’ll give the allowance. If you give your ten year old all her money a single bill, she’ll have trouble implementing her budgeting plan without hitting a store to make change. On the other hand, if she gets smaller denominations she may find it easier to set aside the money for the various parts of her budget. And very little kids need their allowance in coins so they can immediately put their 10% away in their piggy banks.

Tomorrow: The final installment