Of all the lessons of life, learning to manage money is one of the most important. Teach you kids money management now and they can live life well in the future. Even with a limited income, families that understand money management are able to live well, while those without these skills may have a much larger income but live like paupers.

One method commonly used to teach children about money employs containers used to divide any money the child gets. Whether allowance, gifts or earnings, the child is taught to divide his income into these four categories: savings, giving, taxes and spending. Twenty percent of the income is divided evenly between taxes and giving while the remainder is divided between savings and spending. Work out the portion of income that will be saved with the child.

The taxes from each child goes into a family savings account for a future fun activity. That activity may be the family vacation or some other reward. The child does not get final say in what is done with the money just as you and I do not have final say in what is done with our taxes.

The giving jar is money set aside for giving to charitable purposes. If you attend church or synagogue, your child may want to give his money there. Otherwise, you may find another charitable organization that the child can support. Giving helps children to understand the importance of helping others.

The savings jar is where the child puts money that will be saved for larger purchases. It may be easier to open a savings account at your bank for the child. In any event, savings should not be where the child has easy access to the money. Watching the pennies add up in savings helps a child to realize that a little here and there can add up to enough money for a major purchase.

Money which is left over is the spending money. The child needs freedom in spending this money as he chooses. He needs the safety net of home to learn that if all the money is spent the first day, then no more money is coming until the next payday. It is much better to learn this early than when first trying to live on one’s own.

Teaching kids money management may not make you the most popular parent on the block, but it does help to ensure that your children are successful in life. Success is not measured on the amount of money we make, but what we are able to do with what we have.

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