Of all the gifts you give your child, the ability to understand and handle money is probably the most valuable. The tools and lessons you give them to create a solid financial foundation will help them throughout their entire life.

Of course, it’s almost impossible to convince your child that the values of these lessons outweigh the momentary displeasure of not indulging. Luckily, there are ways to make this education fun and rewarding. Here is a step-by-step plan to help you make these lessons not only valuable, but also a great bonding experience

Create a budget. To help your child understand the value of money, they must first understand the difference between income and expenses. Once your child has a job or an allowance, it is time to help her create a budget that considers:

• His/her income
• His/her short-term savings goals
• His/her long-term savings goals
• His/her daily, weekly and monthly incidentals (for this step, you must decide which of their needs you will make them pay for)
• What role does charity play in how they spend their money

When you show your child how challenging it can be to save for that new gaming system or pair of designer jeans, you teach her the value of money. During this learning process, do not be overbearing. Let your child set her own goals and decide what she is saving for. However, depending on the age of your child, you may want to encourage her to save for college.

Lead by example. Let your child work with you to create your family’s budget for short and long-term savings. You don’t have to use your entire budget, but take a portion of your discretionary income and set it aside for this purpose. Then, you and your child are working together on a common goal. If you’d like, you can do this before working on your child’s budget.

Remind her of her goals. When you see your child spending off-budget, remind her that this will hurt her success in reaching her goals. Explain that doubling up on savings in the future to make up for excessive spending now is usually much harder than a consistent, disciplined approach to saving. Show her how it would hurt your ability to reach your goals if you did the same.

Help your child look for deals. When she’s ready to make a purchase, show her how to save by savvy comparison shopping. Or, help her decide whether to use additional savings now or save toward other goals.

Remind your children that smart giving is also a part of handling their money. Do they have a personal charity or ideal they would like to invest in? Is it something you can do as a family? The holidays are an excellent time to focus on giving, but making it a regular part of a budget will help create discipline that can last a life time.

Give your kids the power to decide. By not indulging your child’s every wish out from your own pocket, you create many opportunities for her to make her own important decisions. If your child wants something and you explain that you will not buy it for her, she will be forced to make her own choice. This builds character and will help her learn to make good decisions for her financial future.