iscuss the family budget. Children quickly learn that mom and dad spend a good deal of time working and paying bills. When your child shows an interest, tell her about the big spending categories—food, shelter, clothing, and transportation and how much the family spends on each of these categories. To provide hands-on experience, you may want to let your child help you write out the checks for one month, or if you bank on-line, let her fill in the blanks and click to send the money.

Continue the discussion of needs and wants. You can deepen the discussion about needs and wants by pointing out that the central budget items are needs. To help make the distinction, one mother had her kids inventory the family room, listing each item as either a want or a need. It didn’t take long for her son to see that the Nintendo® was a want, and the telephone a need.

Learning to wait. You may also want to talk about delayed gratification—not in those words, of course. You can point out that if you don’t actually need something, you can wait to purchase it until you have cash in hand. To the inevitable question of “why?” give a simple answer. Just say, “We don’t want to owe too much money. We have to earn the money before we can spend it.” Anticipating a purchase and finally being able to afford it can instill a great sense of pride.

More about choices. This may be a good time to introduce the idea of trade-offs. Tell your child that even very rich people can’t have everything. This is a tough concept and may lead to a discussion about value. Point out that you have to know what you value most before making a choice. For example, if your child begs for an expensive software game, you might ask if he is willing to trade off Saturday movies for a while.

Starting a savings account. Now is the right time to set up a savings account for your child. Some banks and credit unions have child-friendly accounts that do not require a minimum balance and charge low or no fees. Shop for one of these so your child’s savings will not be eroded. Savings rates continue to be low, averaging around two percent. Explain to your child that once she saves a certain amount, she can open a Money Market account or a Certificate of Deposit (CD) with a higher interest rate. This can become a savings goal.

Few financial institutions offer passbooks anymore, so you will probably need to find other ways to make the growth of savings visible. One way is to have your child write down all deposits in a notebook. Also, go over the savings statement with her to see how much interest her account has earned. Keep the savings statements in a three-ring binder, by date, for easy reference.

Should your child have to save? Iron-clad rules seldom motivate, but you may want to strongly suggest that at least 10 percent go into savings. Financial planners recommend the “70-20-10 Rule”—that is, 70 percent of income should be earmarked for spending on immediate needs, 20 percent should be set aside for the purchase of big-ticket items, and 10 percent should be saved or invested for long-term goals. The point is to establish the savings habit.

Help your child establish a savings program with short-term, intermediate, and long-term goals. Show your child that some savings goals are short-term (money for snacks at the movie), others are mid-term (a baseball glove), and still others are long-term (such as saving enough to open a higher-paying savings account, or buy a computer).

It helps greatly to break total amounts needed to meet each goal into the amounts your child will need to save each “pay day” to meet the goal. For example, let’s say your son decides he wants a baseball glove. The glove costs $40. How much must he save each week to buy the glove? If he can save $4 per week—or $8 every two weeks—it’ll take 10 weeks.

To keep children interested, some parents set up matching programs. For every dollar the child saves, the parent puts in a dollar—much like some employer savings and retirement plans. This can be especially helpful in keeping a child focused on long-term savings goals.

Encourage entrepreneurial effort and earning extra money. One great source of extra money is a garage sale. Your children can sell their old toys, books, and clothing. They can polish, wash, and mend things so that the sale items will be more attractive to prospective buyers. You may have to help set realistic prices. The depreciation in what was originally paid for the item and what it can be sold for can be instructive.