It has always been a challenge to teach children to value money. It is possible our school systems have never really done a good job at this, leaving it all to parents. Kids don’t learn about budgeting their money in school. The closest they may come to understanding savings is in discussions about compound interest.

You remember when you learned as a teen that if you socked away $100 a year for 60 years at 6% interest you would end up with over $53,000+. On the other hand, if you started that same savings plan at 40, you would only end up with $5,400+ by 65…what a difference. You may have thought, I will save more and at a faster rate when I am older. You may have been right, but you still lost the power of that compound interest.

So, talk with kids and grandkids about this. Help them understand the difference between what they need and what they want. Encourage them to set some money aside for things they need, help them plan for a purchase that means something to them.

When our kids were small, we insisted that all money they were gifted be used three ways: 1/3 for what they need (or want at that age), 1/3 to savings, 1/3 for someone else – could be to a charity or saved for a loved one’s birthday. We also grappled with “allowances” as we thought (think) chores should be done as a share in the family efforts and not something one gets paid for. Since the parents don’t get paid to keep the house and pets in order it seems unrealistic to establish that expectation for them. We have created extra jobs for earning cash.

None of  us know if we have done this “money education” well. Here are some additional resources: Schwab Money Wise,ThnkQuest, Money Sense (which includes games), and ING’s Planet Orange (an animated, geared towards kids education site). We would love to hear your thoughts on what has worked for you and your children or grandchildren.