Editor's Note: In Growing Healthy Attitudes Towards Money, we discussed general guidelines which dads need to follow when teaching their children about responsible financial management.

Here, we discuss specific guidelines according to the children's ages, taking them from pre-budget to full budget by the time they are financially independent.

Age 8 and under (Pre-budget)

As soon as children are old enough to understand what money is and to receive and spend it, they are ready for a pre-budget.

This pre-budget should be a model of simplicity that encourages children to begin to divide their money into different categories.

Begin by setting up three savings banks at home: one for Giving (or Sharing), one for Savings, and one for Spending. Then, divide the children's allowance or earned money (during this age period most of their money will be an allowance) into three equal parts and have the children place equal amounts in each bank.

By age six or seven, children should be taught the concept of Giving. Encourage them to place ten cents out of every dollar into the Giving Bank. The remainder should then be divided so that 50 cents of every dollar would go into the savings bank and 40 cents into spending.

To make budgeting easier for the children, give them an allowance in increments that are easily divided. As an example, give them four one-dollar coins and change rather than a five-dollar bill.

Each time you give some money to a community or cause that you care about, such as your religious congregation or a charity, encourage the children to give the money they have placed in their Giving Banks.

Money placed in the Spending Bank is to be used to buy the things the children want and which parents should not buy for them. These would include small toys, baseball cards, gum, and so on. However, children need to understand that once those funds are used up they are not permitted to take from the Giving or Savings Banks to buy items they want.

Money placed in the Savings Bank is for the purpose of attaining a certain goal. That goal should not be so far removed from the present that they feel it is unattainable, but it also should be far enough down the road that saving is necessary if the goal is going to be met.

Examples would be saving to attend a ball game, for an outing at an amusement park, for extra money to spend at a school holiday programme, or to buy a special gift.

Age 9-12 (Mini-budget)

By the time children reach the age of nine, they should be ready to move on to a mini-budget. With this mini-budget, expenditures and income should be recorded in a small notebook.

This budget is a little more complex than the pre-budget: 10% percent is allotted for Giving or Sharing, 25% for Short-term Savings, 25% for Long-term Savings, and 40% for Spending.

Short-term Savingsi should be for something which the children will have to save up for over a period of three to six weeks.

Long-term Savings should be for something which they will have to save up for a period of three to six months, or longer, if they choose to save longer.

The goal with this mini-budget is to get children into the habit of keeping tabs on their finances and saving for both short-term and long-term goals.

It is also at this stage that children should be encouraged to supplement their allowances with work (inside or outside of the house) for which they would get paid.

By age 12, it should not be unusual for more than half of their income to be generated from paid work.

Teen years

These are critical years for children—the transition years to adulthood.

By this time, the basics of personal finances and budgeting should be understood and applied by your children.

Written records and budgets should by now be a fundamental part of children's financial planning. These budgets should be categorised into Giving or Sharing (10%), Taxes (5%), Short-term Savings (25%), Long-term Savings (25%), Expenses (10%), and Spending (25%).

The new Taxes category is designed to prepare children for paying taxes, without actually getting the government involved. To “administer” this, you can set up a “bank” into which the children will deposit their tax money. You may want to add matching funds to the “bank”. This money cannot be spent before an established amount has been accumulated. Then the family can decide how the money should be spent. However, contributions to the fund do not end; they just start over again.

The new Expenses category is intended to prepare children to pay utilities and other monthly bills.

Figure out what 10% of the children's income will be and then find a monthly bill that matches that amount. It could be a portion of the handphone bill, home phone bill, cable television bill or magazine subscriptions. When the bill arrives each month, the children's allocated 10% will be used to pay the bill.

Within limits, children in their teen years, especially from 16 to 20 years, should be allowed to make their own financial decisions. Certainly, these decisions will vary by age and personality. Dads who allow for such decisions, will get a clearer picture of whether their children are ready to be financially independent.

In addition, these decisions become notably applicable when children start working outside of the home. This is because the children are at this stage, earning more of their own allowance and taking less from the parents.

With maturity comes added responsibility. Children should be allowed to share in the financial responsibility of caring for expensive items, such as cars, gym membership or dining at restaurants.

For example, if the children are driving, insist that they pay for insurance, a portion of the maintenance and upkeep, and all ticket or parking violations. Consider suspending driving privileges for serious offenses.

In conclusion, dads should be aware that they are not merely raising children; they are raising future adults. Therefore, dads must not allow their children to leave home without learning and understanding the basic principles of financial management.

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About the Author: The Dads for Life Resource Team comprises local content writers and experts, including psychologists, counsellors, educators and social service professionals, dedicated to developing useful resources for dads.