Teach Your Child about Budgeting

Today it's time for Tip #2 about how to teach your children about money. The old adage, "Money doesn't grow on trees," probably isn't enough to teach your children that money is a limited resource. Instead of giving them a visual of a money tree, share the family budget with them instead.

Depending on your child's age, you can accomplish this in a couple of different ways. With a set of jars and a pile of change, you can easily show small children how limited money can be. Label each jar with a sticky note or piece of paper that describes a household expense.

Some categories may include mortgage, food, electricity, water and clothing. Start out with a pile of money (can be bills, coins or even monopoly money in order to illustrate the point).

Tell the kids how much money in income you have every month and then go through expense by expense as you drop the money in the appropriate jars. At the end of the expenses list, explain the money that is left over can be used for other purchases such as going to the movies, on vacation or buying "extras" such as candy or other things your children enjoy.

Older children probably don't need the jar exercise, but sit down with a spreadsheet on the computer or a paper and pen list of income and household expenses. You can illustrate the same point--money is limited and "fun money" can only be spent after all of the necessities in life are paid for.