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Women tend to be the spenders in the family. Not in a bad way. But they are often the ones to buy food, clothing, household supplies and household furnishings. That’s why they are particularly suited to teaching their children about money.

But what’s the best way to teach children about money? Explaining how is an excerpt below from my upcoming book, The 1-2-3 Money Plan: The Three Most Important Steps to Saving and Spending Smart Like all advice in the book, it has just three steps.

HOW TO TEACH KIDS ABOUT MONEY, 1-2-3

Teaching children to be good spenders and savers is a topic that can befuddle even the most well-intentioned and well-informed parents. The main tool is an allowance system, which can teach skills kids will use for the rest of their lives.

As those children mature into adults, they will have to resist almost constant marketing pitches from advertisers on TV, Web sites, billboards, magazines and newspapers. And they’ll probably have credit available to them, allowing them to buy even when they can’t afford it.

Money troubles await children who don’t learn that money is finite, and they have to make trade-off decisions with purchases. They’ll have to distinguish between needs and wants.

1. Give children an allowance

Customize allowance amounts to what you can afford and what you think your child can handle. But don’t give too little. The child needs to be able to save enough money in a relatively short period to buy something he or she wants.

A suggestion: Beginning around the ages of 5 to 7, give 50 cents per week for each year old the child is. At age 10, give $1 per years old. A less accelerated plan is $1 weekly for each school grade level.

2. Don’t tie allowance to chores.

Don’t confuse money lessons. Learning how to spend smart as a consumer is a different lesson than “you have to work for a living.” You are not paying your children a salary; you’re giving them money as a tool for learning, like you would give them a piano to practice on or flash cards with which to memorize multiplication tables.

So don’t tie allowance to chores. Chores are to be done by the child for free because he or she is part of the household and has a responsibility to help operate it. If a child decides she doesn’t feel like doing chores and will forgo the allowance, the allowance system crumbles and the lessons are lost. How will you respond when you tell her to make her bed and she asks, “How much are you going to pay me?”

To instill a work ethic and entrepreneurial spirit, offer a list of optional jobs a child can choose to complete for extra money.

If you disagree with this philosophy, go ahead and tie allowance to chores – after all, you’re the parent. But regularly talk to the child about both lessons – spending and earning – separately.

3. Make rules

Require the child to earmark money each pay period for three accounts: spending, saving and giving. For younger children, it’s easy to place equal amounts into three containers or envelopes, labeled with each category. Identify types of purchases the child will be responsible for. Don’t give loans or advances.

The “spending” account is where all the action is, and some of the best lessons. Money in this account should be spent regularly.

Allow children to make mistakes with this money. You want them to buy things impulsively that they later regret. You want them to buy a poor-quality item that breaks. You want them to run out of money, forcing them to save for several weeks to buy the next thing. You want them to choose among similar items with different prices.

Children need the repetition of buying things and witnessing the consequences of the decisions. Of course, parents should retain veto power over types of purchases, such as candy or dangerous toys.

Regularly talking to children after money decisions, especially poor spending decisions, is crucial. Talk about your own money life, too, such as why you’re using coupons at the supermarket, how credit cards work.

With the “saving” account, the point is to show how money adds up over time. This money is not to be spent but to be counted and monitored. When you dismantle the allowance system in the child’s late teens, the money can be used for college expenses or a car, for example.

Earmarking money for “giving” — weekly church donations or periodic donations to a charity – provide a deeper lesson about what money can be used for.

Of course, you can adjust the allowance plan to fit lessons you are trying to teach. Here are examples:

• Include lunch money in older children’s allowance and offer a deal: The children can keep the lunch money for each day they make a lunch at home and brown-bag it.
• Switch to a monthly allowance for older children, forcing them to budget their money over a longer period.
• Make saving optional but offer to match the child’s contribution to their savings dollar for dollar.

Details of an allowance system aren’t as important as making the effort to start one, adjusting it over time and teaching the lessons.