Gather the monthly bills. These should include mortgage payments, consumer debt and living expenses, such as groceries and electric bills. It is usually helpful to organize these according to due dates.
Determine the household's monthly income. This should include payment stubs when possible. Take advantage of the teachable moments regarding taxes and hourly wages.
Divide the income into three columns: spend, save and give. Discuss each of these three categories with your child. The spend category should include the monthly expenses, as well as money for unforeseen, emergencies. The save column should be the amount that the family plans to save or invest each month. The give column should be the amount that the family plans to give to charity, the church or other entities.
Add up the income and deduct the expenses, the amount to save, and the amount to give. Account for the left over amount. Determine which column the extra money will go into--spend, save or give. This way, each dollar earned is accounted for in your records.
Discuss throughout this process the importance of having a budget and how budgeting allows the family to know where each dollar will go.