By the time a child is in kindergarten, she should be able to understand the difference between a dime and a dollar; therefore, she should be ready to receive a regular amount of money. The allowance might be a dollar per week for every year of her age, but it shouldn’t be handed out without any responsibility. It can be tied to the performance of regular duties, such as taking out the garbage or cleaning up the dishes, with strict rules and accountability — no money until the jobs are done. If the kids want to earn more than their weekly allowance, they can perform extra work like cleaning up the yard or shoveling snow.

Moms and dads should be careful about providing an “advance” on allowances, as it can ingrain a dangerous pattern of spending and debt that can hurt the child as an adult. Parents can use a simple notebook, spreadsheet or calendar to track the work performed and the money paid to the kids. The job can be made easier and more enjoyable by using apps and programs such as iAllowance, Bankaroo or Allowance Manager.

Whether the money comes from allowances, working or gifts, it’s crucial that the children understand the concept of using only a portion of any income now and saving some for the future. The parents can direct that a quarter of any new money can be spent as the child pleases, within reason. Half can go into savings for larger future purchases, and the final portion can be set aside for a charitable organization or someone less fortunate.

There is something to be said for compartmentalizing the money into jars or envelopes labeled for each category, as the visual and physical interaction can help the child learn the segmenting process. More digital-savvy families might also want to check out the Three Jars program at www.threejars.com.

It’s hard to get adults to save money for tomorrow instead of spending it today, so it’s no surprise that kids can struggle with delaying that same gratification. You and their parents can demonstrate the power of compounding to spark a life-changing saving habit. Take a simple calculator (like the one at tinyurl.com/savecalc) and enter in the amount of funds the child has accumulated so far, a realistic figure that the child (and/or the parents) can add every month, and include a growth-based prospective rate of return.

For instance, an eight-year-old who starts with a $100 now, adds $100 per month and earns a hypothetical annual return of 7 percent, would have over $1,000,000 in 60 years. Additionally, several large fund providers, such as Schwab and Blackrock, offer low-cost funds that require low minimums for initial and ongoing investments.

Trips to the mall and shopping online can be sources of contention for parents and their children, as many moms and dads don’t want to pay extra for the name-brand versions of clothing or accessories that their kids desire. Here’s a simple exercise parents can use to see just how badly a child wants a particular item — and make her feel the pain of the higher price.

Say she needs a pair of basketball shoes. The parents see that a reasonably priced pair is $50, but their daughter wants a $100 version endorsed by an NBA star. The parents tell her that they are going to give her $50 to buy the basketball shoes to use as she sees fit. If she wants the $100 pair, she will have to make up the difference out of her own pocket. Not only will she likely decide to stick with the more-affordable version, she may even shop around for a $40 pair so she can spend the extra ten bucks as she pleases.

One way to make the most of a child’s passion for a particular product is to discuss who is actually making the money from that product and how she can move from being the “spending consumer” in the transaction to become a “receiving owner.”

The best way to become an owner of a company is to buy shares of stock, assuming it’s publicly traded. Whenever children express an interest in a store or product, the parents should ask if the kids have checked to see if the company is publicly-traded, and have them research the basic fundamentals of the company’s earnings and stock price. When they’re ready to make a purchase, a website called Sparkgift allows users to buy full or fractional shares of thousands of different stocks (and mutual funds) for a very affordable fee. Parents can even establish a gift registry for others to apply funds towards a child’s investment wish list. Since it’s all done electronically, friends and relatives from far away can easily participate. 

However, if it’s possible for you to open an account for the child at your firm and purchase small amounts of shares cost-effectively, by all means do so. The parents will appreciate you taking the time to handle the paperwork. You in turn can establish a relationship with the child — who between saving, investing, and inheriting, may one day be a very desirable client.