Have your kids earn privileges as well as money towards those special items that they want.
I got this idea from http://frugallythrifty.com/ (check it out!)
For example, when the kids help clean up the play room that they have destroyed, they can earn $2 in "Daddy/Mommy" bucks. If he/she picks it up all by herself — without complaint – the price goes up to $5.
So, what does she get with daddy bucks? In our house, the redemption for items she wants is double bucks. So, if her movie costs $15 at the store, she must have earned $30 in daddy bucks to get it. She is yet too young to want to do sleep overs and the like, but we will work those into her “budget” as she gets older. Here are some ideas:
Stay up 15 minutes late: $10 Play computer games: $5 (for 30 minutes) Go to a friend’s house: $15 Have a sleepover: $30
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