While you want to teach your children how to manage money and be good stewards, what is the “right” way to do it? Do you give your child an allowance or not?

My husband and I have been on both sides of this equation at one time or another, sometimes drifting back and forth, really. This left us many questions about how we were teaching our children about money management.

We tried the “$1 per year of age per week” and I think we failed miserably at that. Our oldest child, who was 8 at the time, wound up with money in the bank that she didn’t know how to manage. And simply letting her make mistakes, as the experts advise, didn’t work. One day, she had $100 in the bank, and the next, she had $2, but had a great collection of Webkinz. What did she learn, really?

Then, we tried the “money for chores” reward system. I spent days making chore charts, and assigning chores to children, and figuring out the monetary value of each chore. That went over like a lead balloon for us. For one, did we really want our children to learn that if they did a chore like make their bed, or pick up their toys, that the reward would always be monetary? What about going out into the world at a job? Would they only flip a hamburger if they got paid specifically for that? Would they charge extra for putting on the cheese slice since they got “extra” for taking out the trash at home? And our middle child, who was 7, decided that he would rather make $1 for making his bed than 50 cents. So, we were in a struggle. What did he learn, really?

We have been following Dave Ramsey’s babysteps for some time now. We would like our children to have a little more knowledge about money and how it works than we grew up with. I grew up not really knowing how to manage money. As I graduated from high school at the age of 15, and got my first job at 16, four months later, I really had no bills. I worked two full time jobs since I was bored, and didn’t have any money saved. I spent it as fast as I made it. I learned at an early age how to play “checkbook roulette” where you would cash a check at one store, and deposit the money to cover a check that you wrote that you didn’t have the money for, then the next day, you would go to a different store and repeat the process. YIKES! I vowed that I would teach my children good money stewardship. Well, I do get an “A” for effort.

We have tried the following process and I think that it’s working for us.

We have played the game “CashFlow for kids” with our children as a family. We are wanting our kids to learn that real wealth does not come from debt, as we learned growing up. The whole premise of this game is teaching kids that when their “passive income” (money NOT worked for) exceeds their monthly outflow that they are truly wealthy.

So, simple terms, right? Well, what my now 10 year old daughter has been doing is saving her money from her birthday. She has sought out sale prices on pop, and looked for coupons. She has “invested” her stash into pop and chips for our annual community garage sale. She is hoping that she will more than double her money. And, as a bonus, she has figured out how to buy for the lowest price and wait until things go on sale. Our son, who is 8, has been learning that you really don’t have to pay full price for anything if you are willing to wait. He has been wanting this Webkinz for some time now, and had the $13 saved up for it. Bam! There was a coupon in our Sunday paper for Meijer that had $3 off Webkinz! He got the Webkinz, and got to save $3 in the process. He is using that leftover amount to invest in his sister’s pop stand. He will become a shareholder and get $4 back. Nice, huh?

We no longer give our children an allowance either for chores or “just because.” We would like them to learn early how to invest and watch their money grow and work for them. Hopefully, they will know more about money management when they are off to college than we did. Maybe they won’t repeat our mistakes.

What are some of the ways that you teach your children about money stewardship? I would love to hear your ideas!

Heather is a stay at home mother with 3 blessings to take everywhere with her. Teaching women to shop and save and get the most for your dollar are a vision that has been a long time in the making. She enjoys sharing her trials and triumphs at the local stores, as well as some good (and some not so good) recipes to help make those dollars stretch. Her column, “Practical Penny Pincher” is a must read for the thrifty homeschool mom. Visit her blog at Titus 2 Woman.