Read Psalm 50:10 to 12: "For every beast of the forest is Mine, the cattle on a thousand hills. I know every bird of the mountains, and everything that moves in the field is Mine. If I were hungry I would not tell you, for the world is Mine, and all it contains." Explain to children that anything the family has is a gift from God since He owns it all. Earning money and having "things" is not a right but a privilege and a blessing from God. Therefore, greed and possessiveness have no place in a Christian's heart. Promote an "attitude of gratitude" and a willingness to share the blessings the Lord provides.
Choose and stick to an allowance plan. Parents debate whether it is more effective to pay children for chores or to keep allowance separate from chores so that children have a regular income with which to learn money management. Feelings run high on both sides of the argument, each with its own benefits and shortcomings. Some parents try to combine the two and have a base allowance plus bonuses for extra chores. Regardless of what you choose, consistency is the key. The point of allowance is to help children learn financial decision-making skills, and that can only happen when the money comes at regular intervals, just like a parent's payday.
Set a good example of spending. Children pay more attention to what you do than what you say. If you enjoin them to save their money for an important purchase but they see you constantly frittering away your money on impulse purchases, you lose credibility when you impart financial advice. If you habitually pull out the credit card to pay for things you cannot afford and don't need, children learn that being in debt is preferable to waiting and saving up for something they want. If you want them to tithe, make sure you are following your own advice. Read Romans 13:8, Proverbs 22:7 and 1 Corinthians 7:23 with your children and talk about how debt enslaves the borrower to the lender, and Christians are to be slaves of Christ, not men.
Keep it simple. Children will learn more through the experience of trial and error than 1,000 words from you about how they should spend their money. Many parents simply teach children to divide their allowance between three or four piggy banks ---- one for God's money (tithe), one for teaching delayed gratification by saving toward a desired toy, game or article of clothing and one for "play money" that they can spend as they desire. You might also choose to have a bank for saving toward long-term goals such as college or a car; or for giving to various charities that your family supports. Pay them in coins or small denomination bills that make it easy to divide the money between the banks. Work out the percentage of each allowance that is deposited into each bank every payday. When the child sees something he wants at the store, remind him to check his "play money" bank and see if he has enough to come back and get it late. Avoid the temptation to give into tantrums or begging for the sake of peace and allow the children to learn the value of saving.
Respect the child's choices in how to spend "play" money. Let him learn from the natural consequences. When she buys cheap toys that break after the first 5 minutes, talk about whether that was a good investment. Ask the child whether she would make the same purchase again and encourage budgeting for higher quality toys but don't prohibit the child from making the unwise choice as it serves as a learning experience. If he spends all his money on ice cream and candy bars, don't lecture him on healthy snacks. Wait for him to ask for the cool but expensive pair of shoes that "everyone" is wearing or a new video game. Remind him to check his "play" bank and empathize, but don't give in when he says it is empty. Try saying, "Oh, that's so sad. I can tell you really want those shoes, and they are very cool. So how many weeks play money would you need to save up to buy them? I wonder if there are any ways you could earn extra money to save a little faster. Good luck. Let me know when you have the money, and I will be happy to drive you to the store." Children probably won't take that well at first but remember Hebrews 12:11, "All discipline for the moment seems not to be joyful, but sorrowful; yet to those who have been trained by it, afterwards, it yields the peaceful fruit of righteousness."