Kids will always spend your money freely and without thought. But, when it is their money, kids are much more frugal and careful with the choices they make. Teach your kids to truly understand money by giving them hands on experience with the real deal from an early age.

Let kids earn, save, spend, donate and invest money. Offer paying “around the house” jobs, set-up allowance and if old enough, encourage kids to get a job to give them the opportunity to be responsible for some amount of money. Any amount of money, from a dime for younger kids to ten dollars for the older kids, will allow kids to understand the difference between your money and their money — and to experience their own change in behavior when it is their money.

Walking through a mall with my girls used to be pure torture. They would want everything they saw and I would spend most of my time with them saying no and explaining why I was saying no. When they started to get allowance, money they were given to cover expenses in their lives that I used to cover, like clothes and accessories, walking through the mall became almost pleasurable.

Allison, my oldest, loves purses. As we strolled one Saturday, Allison spotted the Coach store and seemed to be magnetically drawn to the window. The usual knot in my stomach was not there. Allison encouraged me to join her at the window and gaze at the newest offerings. “Wow, they are just gorgeous mom,” sighed Allison. “Yes, they are really something else honey,” I agreed. Allison sensed an opportunity in my agreement. “Really, mom, you think so? May I get one?” she asked. “I don’t know, can you?” I replied.

Slowly, it dawned on her that the allowance money she received was the money she would have to use to make this purchase. Her money. She rolled her eyes at me and we walked away. WE WALKED AWAY! Amazing. So, with her own money at risk, her own “skin in the game,” she was not all that interested.

Try this with your own kids and strap yourself in — it is a real eye opener when you find out that what they have desperately wanted in the past, is really not so when they are asked to use their own money.

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