Get ready to negotiate
There may come a time when your child asks for more. It's up to you to evaluate the request and decide if you'll ante up. But be reasonable. If you expect your child to pay for his or her own movie ticket and they cross the age-threshold that forces them to buy an adult ticket, you may have to come up with a few extra dollars each week. But make sure that your child provides you with a reasoned argument. "Because I need more" simply doesn't cut it. You're teaching your children skills that will come in very handy the first time they ask for a raise at work.

Help them earn more
What if what your child wants is a $90 pair of sneakers or a $150 MP3 player? On a $10 a week allowance? I'm a firm believer in delayed gratification. Things mean more when you have to wait for them. But to a child, waiting nine weeks for the sneakers may simply be impossible—it may be too long a period of time. And you don't want them giving up on their quest. You want them to succeed. Only by saving for something that he or she really wants and then achieving their goal will they learn that a) they can do it and b) it was worth it.

So, I'd suggest helping your children in one of two ways. You can start a mini 401(k) at home and match each dollar saved with another of your own. That will help your child reach the goal faster and lower the odds of quitting. Or, you can offer extra jobs for extra work. My friend Diane keeps a list of jobs with the price she'll pay for completion on her refrigerator. Just be sure, if you do go the job route, that you pace your offerings. You don't want to make the payoff to quick. You're grooming a saver. And by doing so, you're helping your child get started with Step Three.

Teach them to budget
Once your children get good at managing smaller amounts of money, you'll want to teach them how to stretch a larger amount over either a longer period of time or more tasks. The first time I had to do this was when I earned my spending money for my first year of college the summer before, then had to make it last two semesters. I blew it—and during Christmas vacation found myself at the sporting goods store where I'd worked in high school begging for a few hours. Susan Beacham, founder of the Chicago-based financial education company Money Savvy Generation, once explained to me that she taught these lessons to her daughters while they were still in high school. How? She gave them each a budget for school clothes, had them each make a list of the things they needed and hauled them to the mall. Then she sat there, patiently, as they discovered on their own that you could buy four shirts at a discounter for the price of one in a department store.

Now that your child has some income, make saving and investing a habit with Step 3!

Get all the steps to raising money-savvy kids


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