Teaching My Son How to Manage Money

My husband and I really want our children learn the value of saving money, and we've already started with our six-year-old son Zach. As I wrote about previously, he's already become a microlender thanks to Kiva.org.
 
 
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As young as three years old, Zach "earned" his toys. We had a reward chart, and if he cooperated in going to school, taking a bath, and going to bed, he'd earn one small Lego piece per day. Once he got seven days of good behavior, he'd earn a larger reward, like a Thomas the Tank Engine toy or a Hot Wheels car. Eating vegetables was also on the reward chart, but if we had enforced that, he would have never earned any rewards.
 
I was honestly concerned that we were being too generous with the rewards, but I respected my husband's wish that Zach "earn" his toys rather than just receive them all as gifts.
 
Now that Zach is old enough to understand the benefit of waiting, we've started giving him an allowance. Any toy he wants now he can buy with his own money or put on his birthday or Christmas list.
 
To manage how much money Zach has, we use an iPhone app called FamZoo. They offer prepaid or IOU accounts to help kids learn how to save money.
 
We set up an IOU for Zach that automatically adds $2 per week as his allowance and adds 3% interest every week. When he wants to buy something, we can check his FamZoo account and see how much is there, and deduct the amount from his account without transferring any actual money.
 
We specifically chose not to open a savings account at a real bank because interest rates are so low, he'd never see the benefit of saving and earning interest.
 
It turns out that Zach is pretty fiscally conservative. He doesn't ask to buy things that often. He's managed to save up to $60 before.
 
Recently, he had only $25 in his account, and he decided he wanted to buy a book that cost $16.99, plus tax. I asked him to wait awhile in the bookstore and really be sure he wanted the book because it would wipe out most of his savings. He looked through it for awhile and just before we left the bookstore, he said he still wanted it. I bought it with my credit card, and debited his FamZoo account.
 
Later that day, Zach had his first experience with "buyer's remorse." He kept crying saying he both wanted to keep the book and wanted the money back. We spent a good deal of time that night talking about the pros and cons of returning the book and finally encouraging him to sleep on it and decide the next morning.
 
Zach couldn't decide so he asked us for our opinions, and then even asked us to call one of his uncles who I guess he thinks makes good choices. By this time, we were all in agreement that the book wasn't worth wiping out his savings, so we returned it. Zach had labored over the decision so long that by the time we returned the book, he was totally okay with it.
 
My husband and I are both really happy that Zach has learned so quickly the value of saving money. It's such an important life skill, I really don't understand why it isn't taught in school from a young age.
 
We offered to put the book he wanted on his birthday wish list, and I think when it gets close to his birthday, I'm going to offer to buy him the book, or put the money into his account and let him decide whether to buy it right away or let it earn interest for a few weeks before buying it.
 
How do you help your kids learn to manage money?

You can try FamZoo for two months for free, then it costs $5.99/month or $30/year. Their site states that if you really can't afford this, you can contact them and work something out.

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