Five Tips for Helping Kids Understand Money and Work

1) Be a friend and partner to your child -- not a tyrant. Dealing with money and understanding its relationship to hard work doesn't come easy for any of us -- especially kids. A little gentleness and kindness will go a long way. Sure, there will be times of correction, and even discipline, but remember how tough all this stuff was for you to learn.

2) Don't be in a rush to bail the kids out of every financial problem. Help them process the situations they confront, and find solutions. Look for opportunities to teach life lessons.

3) Help your children learn the difference between short- and long-term goals. Usually money for short-term goals like birthday gifts, saving for summer camp, or buying a special shirt or top, is best kept in a simple bank or credit union savings account. These accounts make access relatively (but, not too) easy, and usually pay a little interest. Long-term goals like college savings or buying a car might be invested differently. If your timeline is at least five to seven years out, you might want to consider putting the money into a mutual fund. Remember, the real purpose in all of this is to help teach your children about how money and markets work.

4) Consider giving older kids larger allowances and supplying fewer of their needs. Teach them to budget their allowance for clothes and other items that you bought for them when they were younger.

5) Always remember that God is the Source of all wealth. Use money as an opportunity to teach about God's love and provision -- and, the responsibility that it places on us to use it, and share it, to His glory.

From Steve Diggs.