Here is one mom's attempt to implement a "system" to teach my kids about money and spending. My idea is that any system (even one that doesn't work too well) is better than none. Having no system leaves a vacuum that invites kids to continually whine, grumble, and pester you for stuff they want you to buy for them.

My system is based on the book The First National Bank of Dad: The Best Way to Teach Kids About Money, by David Owen. I highly recommend it. The strategies I use are for elementary school age kids. The book also talks in detail about the pre-teen and teen years.

1. Set up an allowance. Philosophies differ on allowances, but my view is that the "job" of children is learning and doing well in their studies. As long as that is happening, there is no reason to withhold allowance. An allowance simulates the paycheck which will come later in life. The kids get paid on the same day each month and are learning how to make it last until next pay day. Amounts are based on their ages - more as they get older. I don't pay allowance for doing chores, although they do have chores. My belief is that chores and housework are part of family life. If the kids want to do extra jobs (like washing the car or yard work) they can earn extra money.

2. Set up a bank account for each child. Nothing new, except my kids' bank accounts are not at our local bank, they are with Mom and Dad. Banks do not pay enough interest on savings to give anyone, let alone impatient kids, an incentive to save. At the current measly rates, they will only earn a few pennies on their statement each month. Hey, I think that's what we're making on our savings, what a rip-off! When the kids save at the Bank of Mom and Dad, they make 5% interest per month.

According to David Owen, school age kids need to see concrete rewards for saving. A couple of cents printed on a bank statement is not going to do it. For young kids, paying them in real dollars and cents to deposit into their account at the end of each month is a stronger incentive for keeping their balances up. They watch as I calculate the interest on their month end balance. It's not long before they'll learn how to calculate 5% on their own. The more they have in their accounts, the more interest is paid. My kids have actually waited until month end to buy things because they've figured out how to spend just the interest while keeping their principal intact.

3. Set up guidelines and rules. The general guideline is their money pays for extras, stuff Mom and Dad were not planning to buy like:

• Toys and games that are not birthday or Christmas gifts.
• Treats or impulse items from grocery shopping trips, like candy or gum.
• Fast food restaurant meals over their 2 times/month limit.
• Gift shop/vacation souvenirs from trips and travels - the zoo, aquarium, Disneyland, etc.

I've learned that I still need to limit the shopping trips. Some trips, like supermarket shopping, are not for them to shop. On other trips, I specifically make time for them to shop for 1 or 2 items. They withdraw funds from their account to take with them. I've found that without these limits they still have the potential to come home with a tremendous amount of stuff.

When older, a teen's allowance can be used for clothing, outings with friends, music, technology (phone, texting, and anything beginning with an "i"), etc. You have to continually negotiate which items they are responsible for. When they need clothes, for instance, David Owen recommends that teens simply pay the difference between a basic item you would get them (T-shirt from Target or Gap) and the marked up T-shirt with the trendy Hollister logo that they just "have" to have. The teen must decide whether it's worth the extra out of her own wallet.

4. Reduce exposure to the culture of consumerism. It means limiting TV, computer time, mall trips, etc., where they are tempted to want and buy everything they see.

5. Get something, give something. This rule is loosely enforced and usually applies to a large influx of gifts, like on birthdays. If they get a bunch of new stuff, they must go through their old things and give away (or sell on eBay) about the same amount of stuff. I also don't mandate charitable giving or tithing but I encourage it by matching any donations they make at school or elsewhere.

6. Teach outright. I try to get my kids to watch me balance the checkbook and pay the bills on Quicken. They can also help clip coupons. It can't hurt to show them how to be frugal!

7. Realize they will make mistakes and bad choices all along the way, we all have. Try not to swoop in and rescue them (this is very hard for me). Let them learn from their mistakes.

Judging by all the Pokemon cards, Hot Wheels, Barbies and Bakugans that my kids have collected using their own money, I suspect that my system isn't going to be enough. Why is the temptation to buy stuff so strong for us humans? The day will come when one of my kids will eventually get suckered into a purchase of the latest $150 True Religion jeans. (I will have to suppress a scream if that happens.) I know we'll need to make adjustments to the plan once they get older.

I just have to keep going, and hope that some lessons about money will stick long term. I can hope my children won't rack up major debt on their credit cards as young adults and expect a bail-out from the bank of Mom and Dad. Most of all, I pray that my kids would learn that their self-worth is based not on their possessions, but on their God-given gifts and talents.

Any ideas about how to "unspoil" kids, teach kids about money, saving or budgeting?  I would love to hear about them!