Angela Amico Olchaskey thought she could use the economic crisis as a springboard to educate her daughter, Kiley, 9, about money, but her plan hasn’t worked out so well. “I’m finding it very hard,” admits the Manchester, NJ, legal secretary. “Mainly because I have spending issues of my own.” Angela admits that she likes to shop—a lot. So much, in fact, that when she recently took her daughter to see Confessions of a Shopaholic, Kiley turned to her as they left the theater and asked, “Mommy, are you going to have to sell all your Burberry bags?” Angela asked why, and Kiley responded, “Because you’re a shopaholic, too.” Angela was surprised—and stymied. Was it too late for her to teach Kiley better financial habits since she had flunked the role model test?

Tip: Help make learning about money fun. Even a lemonade stand can teach kids valuable lessons in finance.

The good news is that it’s never too late to start a conversation about money with your kids, says Diane Lang, an adjunct professor in psychology at Montclair State University in New Jersey. And if you need to work on your own spending habits, you can suggest you learn how to do this together. “Kids get used to certain habits,” she says. “They might be used to getting whatever they want when it comes to toys and clothes, but you can modify that situation at any time.” She suggests parents be honest with their children about the need to economize and help them get involved in the family’s savings efforts.“Take baby steps with the changes,” Lang says. “For example, tell your kids they can take one afterschool class instead of two, and let them pick the class. Don’t cut out all afterschool programs.”

Lang helps her own daughter, Lauren, 6, get involved with the family’s shopping and spending. “I’ve taught her about money and options,” she says. Lauren helps her mom write the grocery list, cut coupons and even pick out the sale items. Setting the right example is key, so work on being a strong role model. “Children learn through observation,” Lang says. “As a parent, you don’t want to tell your child one thing and do the opposite. This sends mixed signals.” If you’re tired of feeling like an ATM, perpetually shelling out money for snacks, CDs, school dances and other extras, start by taking a look at your own spending habits. Next, follow these easy steps to help children of all ages learn to save, become more independent and discover creative ways to generate income.

Give them an allowance
If you decide to pay your child an allowance, experts recommend you consider several factors, including your child’s age, your family’s income and what the allowance will cover. Using a rule of thumb (such as $1 per each year of age) to set the amount is only a starting point. An allowance of $10 per week may be okay for a 10-year-old, but $15 a week may not be enough for a 15-year-old. 
You also need to make some realistic judgments about how much money your kids will need as they get older. Maribea Berry, a readiness manager in Palo Alto, CA, asks her teenage daughters, Elizabeth, 16, and Katherine XX, to use their allowance to subsidize birthday presents for their friends and special items for themselves. “They earn an allowance for helping around the house and working as babysitters and pet sitters,” Maribea says. She sets a limit of $15 that she will pay for a friend’s birthday gift. “If they find something that costs more, they must pitch in the extra money for the gift. So far they’ve been willing to do this.”

Kristy Jackson, a career counselor in Sioux Falls, SD, gives her sons, Forrest, 7, and Cameron, 5, an allowance for doing chores like helping in the yard and big cleaning projects. But she also has them do some tasks without payment. “The chores they do for free include recycling, putting away dishes, putting away their laundry and feeding our pets,” Kristy says. “We’re hoping this helps them realize that families need to work together and that each member of the family contributes to maintaining a nice place to live.”

Explain self-control
Gayle Flynn uses a back-to-school budget for clothes to help her younger children, Shannon, 11, and Elizabeth, 9, learn to set limits. Gayle, an executive director for business analysis at Cenduit in Cary, NC, assigns each child a budget and lets her decide what clothes to buy within the set amount. “It’s fantastic to see them looking for sales to get more for their money,” Gayle says. Just as important as working within a budget is learning about self-control, says Melissa Martinez, an attorney in Atlanta. She pays her daughters, Ana Sofia, 10, and Isabel, 9, for certain household chores, and each one has a piggy bank, an education fund and a savings account. “Even if we can afford an item but we think it’s too pricey or they don’t need it, we explain that not buying this item will allow us to use the money to buy something we actually need or for our next family vacation,” Melissa says. “Self-control works in every aspect of our lives—nutrition, weight control and especially finances.”
 
Help them save
There are other ways your kids can save money beyond stashing it in piggy banks and shopping smart. When Elizabeth Yano, a research scientist and professor in Valley Glen, CA, thought that her three sons were rushing out to spend the cash gifts they received, she had an idea. “I told them I’d match whatever amount of money that they put into a savings account,” she says. Her oldest son, Michael, then 14, came out of his room with about $60 he’d squirreled away. David, then 11, offered up only pennies. But her youngest, Steven, then 8, surprised everyone when he emerged from his room with an impressive $450. “His brothers were speechless,” Elizabeth recalls. “Steven couldn’t stop grinning as he explained that he’d saved every dollar he’d ever received.” Given the amount her enterprising kids had stowed away, Elizabeth says, she decided to wait a couple of years before making the same offer again. Still, “their savings habits improved. And not surprisingly, Steven, who’s now fifteen, has a CD account that exceeds both his brothers’ accounts.”

Showing your children their bank statements can go a long way toward teaching them about how fast savings can grow, says Rebecca Parks, a diversified independent dealer service department specialist with the Sherwin-Williams Company in Wickliffe, OH. She makes sure her 8-year-old son, Brandon, sees proof that his bank balance is increasing. “He’s empowered by depositing his own money from the allowance he earns and cash gifts,” she says. “And when I show Brandon his statements each month, he can see how his money starts to accumulate and how beneficial this process can be for him in the long run. He has big goals and big dreams.”

As the CEO of Lone Star Screening in Bedford, TX, Johnette Van Eeden knew more than your average parent about profits and losses and how to reach for goals. That’s why she taught her kids to save up their money from an early age, helping Danielle, now 19, and Andre, now 18, open bank accounts. “We taught them how to record transactions in a ledger, and later on an Excel spreadsheet, to track their balances,” she says. Johnette believes the lessons paid off. Danielle, now in college, sometimes pays for her friends to go to the movies and for snacks. “That’s because she’s the only one who’s saved up any money,” Johnette says proudly. “I’m hoping that Andre, who just started college this fall, does as well.”

Encourage creative thinking
The promise that your kids will get something they really want can be a great motivator. Carmen Kenrich, an executive health-care recruiter in Winchester, MA, encourages her eldest daughter, Taylor, 8, to justify in writing items she wants her parents to buy her. “I had her write in four sentences why we should sign her up for tennis and buy her a racket,” says Carmen, whose younger kids, Trace, 5, and Tatum, will be expected to follow suit in a couple of years. “It was a great exercise, Taylor’s first lesson about money and expressing what she wants and needs.” When Rita Marie Gordon’s 9-yearold, Ben, wanted to start a soda-stand (think the next step in lemonade stands), she encouraged him and taught him some finance lessons along the way. The Fort Collins, CO, photographer loaned her son $50 in “seed money” for his initial investment of soda and ice. “It was an interest-free loan for four weeks only,” Rita says. “He protested until I explained to him that by loaning him my money, I was unable to invest it somewhere else and earn interest on it.” By the end of his second week in business, Ben had paid his mom back.

“We lived in a neighborhood with lots of new construction going on,” Rita recalls. “He rode his bike around with his red Radio Flyer wagon hitched to the back, carrying my camping cooler filled with ice and cans of soda to sell to the workers on the various construction sites.”

Rita explained the concept of tracking inventory, so Ben wouldn’t miss a sale by being sold out of a popular brand. “By counting the cans he took out and what he returned with, he learned what and how much he needed to stock,” she says. “He learned how to make change and be sure he had enough with him.” Ben netted $7 to $13 a day, which he considered big bucks. “Both my parents were self-employed, so I grew up experiencing entrepreneurship as a way of life,” Rita says.

Teach them to give back
Share, save and spend is the approach Donna Collins Williams of Redwood City, CA, a nurse researcher at Stanford Cancer Center, teaches her kids when it comes to what to do with their allowance. It’s an approach she picked up from a lecture by financial guru Nathan Dungan, founder of Share Save Spend, a Minneapolis-based organization that advises young people and adults on finances. Donna started giving daughters Kathryn, 8, and Lauren, 6, an allowance at age 5, paying them $1 per year of age. Their required chores include putting dirty clothes in a hamper, loading the dishwasher and helping care for their pets. One third of their allowance they can spend on small purchases; one third they save for gifts or place in a savings account. The final third they give to charity. “They choose a charity that they would like to give to,” Donna says. “We support the charity by contributing as a lump sum one third of their allowance, which they’ve usually saved up until Christmas.” Websites such as Kiva.org or DonorsChoose.org can help your kids find charities they feel are meaningful.

When her daughters each turn 10, Donna plans to introduce the fourth arm of the strategy, which is to invest. “It’s time we stop spoiling our kids,” says Dungan, author of Prodigal Sons and Material Girls. His family-finance website, ShareSaveSpend.com, offers age-appropriate toys, games and lessons that can enrich your child’s understanding of money.