As much of the world strives to keep themselves afloat financially, a common song financial experts are singing is that you should live within your means. Kids (and many parents) often have trouble understanding exactly what this phrase means, however. That, of course, makes it very difficult to apply some important money principles.

What Are “Means”?

Means simply refers to your money. Many people think of it specifically as your income. Technically, however, your means are any assets you might have, because you can convert assets to the forms you need over time. A house is part of your means, for example, because you can sell the home to get cash. Means, therefore, can include stocks, bonds, property, dividends, pension funds, IRAs, bank accounts and more.

A secondary definition describes means as a system or action you use to get a certain result. In other words, means are the protocols or tools you use to make something happen. In finance, we’d say that means are whatever it is you use or do to complete a financial task or goal.

Teaching Your Kids to Live Within Their Means

Understanding how “means” is defined, to live within your means involves several things. The first is not overspending—you live within the amounts you have or know with certainty you are going to get. This is often hard for kids to do, because they tend to live in the moment and buy based on emotional impulses. To help your child with this, you can:

• Help him set up a budget—A budget provides a definitive number above which your child shouldn’t spend
• Have him track expenses and assets—Whether you use a plain notebook or a computer spreadsheet, tallying how much your child spends and receives will help him stick to the budget and show him where most of his funds go, revealing spending habits. You can use a simple shoebox he’s decorated himself to hold receipts, or if he’s older, a scanning program and special folder on the computer desktop.
• Discuss wants versus needs—Knowing what is absolutely necessary can help your child prioritize purchase decisions.
• Avoid bailouts—If your child doesn’t get more money from you after he’s overspent, he’ll think more critically about how to pace his spending in the future.

Living beyond your means also involves setting very specific goals, because goals influence how you set up your budget. The budget then dictates spending and saving activities. The goals your child sets can be anything from saving enough for a new toy to generating a specific amount by selling something, but they need to be clear. Write the goal down on a paper or make a goal chart so your child has a reminder of what he’s working for, and so you can track his progress. It’s also a good idea to help your child come up with at least one short-term and one long-term goal. The short-term goal will provide some more immediate reward and gratification, while the long-term goal gives you the opportunity to teach about the importance of planning ahead over more extended periods, as well as about the benefits of investing early.

Whether you’re focus is overspending or goals, one constant should be in your lessons: good modeling. It is critical that you live within your means yourself if you want your child to do so. Kids pick up on what their parents do and develop habits from what they see. From the logistical perspective, not living within your means also can translate to you not having money for financial lesson basics like an allowance, or having to work more and losing the time you could sp