My daughter is 7 years old. She became fiscally aware about three years ago. She would ask every Saturday before we went to the neighborhood pool, “Daddy, do you have money?”

She knew that, if the answer was no, she had better get me to the ATM so when the ice cream truck drove by she could get a treat. No money equaled no ice cream.

It was never my intention to teach my daughter about the connection between money and things. I would simply forget to bring my wallet to the pool and tell her there would be no ice cream because Dad had no money with him.

Unfortunately, I think we teach our kids too many unintentional lessons about money and not enough intentional ones. As in a lot of things, if we act more intentionally, we’ll teach more effectively.

Do you want your child to graduate college saddled with debt and completely unaware of how to balance a budget? If not, then a lesson plan for all things finances may be necessary.

Allowances

It’s going to be difficult to teach kids about money if they can’t earn any. Starting with an allowance gives you a jumping off point for those budgetary basics.

If you do choose to set an allowance for your kids, communicate with them about it:

1. Set parameters. Make sure your child knows what he’s done to earn that money and what he is and is not allowed to spend it on.
2. Make it a routine, like payday.
3. Consider rewarding fiscal responsibility with a “raise.” If a child is saving, reward her for it.

Bank On It

When I was growing up, my dad would match $0.50 for every $1 we deposited into our savings accounts. Much like an employer matching contributions to a 401(k) plan, he was incentivizing me to save. What I could earn by mowing the lawn could be increased by depositing it into savings. While I didn’t fully understand it all, the building blocks were in place for me to learn about the time value of money and the benefits of compounding interest.

Of course, you don’t have to open a savings account to teach this lesson. Use your child’s piggy bank to begin establishing an interest in interest. Offer them a certain percent of interest you’re willing to pay them on their “deposits” to their piggy bank. Show them how that interest can help them earn the new toy they’re saving up for. Once they graduate to a savings account at a bank, the idea of compounding interest will already be familiar to them.

Sound Shopping Sense

When it comes to shopping, providing guidance becomes all that more important. As parents, if we’re not careful, our children could begin to believe shopping is a limitless endeavor designed to cure any number of ills. Here’s where more information can be a good thing. Whether it’s going out for a special treat or back-to-school clothes shopping, set a budget with your kids, explain what is and why, and work with them to operate within that budget.

Apply this to big ticket items, too. Lay a foundation for your child to understand they must diligently save for that item. Help them plan how to do it. In a society increasingly dependent on the now, try to teach your kids the value of patiently saving within a plan.

Balancing Act

First, think about the example you set. If you feel you need to make some personal improvements, start there. Then begin showing your kids how to budget. Help your kids learn from your mistakes. You may pass on the wisdom you learned the hard way and help them avoid some of those missteps.

Make it simple. Start with how much money they earn, write out expenses (not including things you will pay for), and see what’s left. If they’re in the black, encourage more saving. If they’re in the red, work with them on cutting unnecessary expenses.

The Future is Now

If you’ve laid the foundation, you can begin getting more specific with your kids as they approach college and beyond. You can begin to show them how investment accounts can complement bank accounts in the quest to set and achieve goals.

No matter how young your child is, they are an adult in training. One day they will have assets and liabilities just like you.

You can choose to leave money a mystery for them to solve, or you can give them the building blocks to make sound financial decisions. It’s your choice, but growing up in the green sure beats living in the red.

Dale Nicholson, III AAMS® is a Financial Advisor at Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC, located 100 Morgan Keegan Dr. Ste. 200, Little Rock. Dale can be reached at (501) 671-1147 or dale.nicholson@RaymondJames.com. Any opinions stated are those of the author and not necessarily those of Raymond James. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.