When my daughter was just six, we began giving her allowance. At the time, I’ll admit that my rationale was a little flawed. She had been helping out with baby diapers, clearing the table, outside chores, laundry, and gopher tasks for almost a year. She enjoyed helping out, but the guilt that I was overworking her took hold. An allowance seemed like the proper way to reward her for her efforts.

A Problem Begins - While she didn’t receive more than a couple of dollars a week, she never wanted to spend it. She would save and save, overflowing her piggy bank and consuming her thoughts. She would often come to the dinner table, counting her money or bragging to us how much she had saved over the past few months.

She would never spend it. There wasn’t much that she wanted. We didn’t have a very large budget for entertainment or novelties, so we knew that it wasn’t because we were overindulging her. She just wasn’t that interested in buying things. I guess I should have been grateful. Then I noticed she quit working as hard.

Chores started to slack around eight years old. When threatened with a decrease in allowance, she responded with a “That’s OK. I have enough money. I really don’t need anymore.” Because she didn’t need money, it didn’t have value. It was a simple dilemma. I hate to say this, but for a moment I was actually disappointed that we weren’t a little more commercialized. If my daughter ever saw something that she wanted, she may have drawn a connection to the power that money could have for her. So I decided to “help her out” a bit.

Our Solution - We devised a movie night. The kids weren’t expected to pay for the movie, but if they wanted candy during the show, they needed to buy it themselves. My daughter loosened the grip on her piggy back and threw in about 50 cents towards the candy stock. Next, I started finding some really great songs for download off the internet. She would beg for her own copy of the songs on a CD for her room. “That will cost you,” I replied. She handed over 50 cents for the cost of a blank CD and $2 more for some extra downloads from her favorite movie soundtrack.

Soon she realized that there was a value to the green stuff wadded up in the bottom of her piggy bank, sock drawer, little pink purse, and anywhere else she could stash it. Money equaled stuff. While at six years old stuff didn’t mean so much, at eight, it was starting to have some worth. We took time to explain what discretionary spending was. We worked out a formula for all future piggy bank deposits to ensure adequate amounts for saving, spending, and sharing. Our daughter was getting excited again.

It Really Works - Chores started picking up. In fact, she started asking for extra chores. Soon she was taking on odd jobs for family, including scooping walks, dog walking, and simple cleaning chores. My daughter was becoming an entrepreneur at nine years old.

What does this all mean for you and your family? It's a simple lesson: Children won't manage money well if they don't value it. Whether the problem is hording cash or overspending, there needs to be a firm foundation for establishing a fair value for the dollar in your home. Starting young and keeping at it can give your child a chance at the best possible financial future!