Your kids may think cash and checks falling from the sky around birthdays and holidays are manna from heaven, but use these gifts to teach them how to handle money.

The basic lessons: setting priorities, making wise choices and saving.

Freedom and Responsibility

Tell your kids that Granny sends money rather than toys because they’re now old enough to make independent spending decisions. Then make sure they understand that with freedom comes responsibility, a basic point many adults miss as evidenced by the nation’s crushing credit card debt.

Stress that the gift isn’t free money and, in general, the same rules that apply to allowances govern the cash gifts. A portion of the gift can be applied to your kids’ clothing, entertainment or the special purchase budget, but don’t let your kids blow the entire amount on video games, CDs or an afternoon with friends at the mall. See The Great Allowance Debate for more.

Encourage your children to save a hefty portion of the gift and donate some money to charity or your church.

If the gift is treated as a windfall, it teaches your children nothing about setting priorities – and lessons not learned when young can lead to financial trouble as an adult.

Ask how your children plan to use the money. Discuss alternatives and stress the importance of saving. The hardest thing for many parents is letting their kids make an obvious mistake. Point out the pitfalls – and if your kids jump into a hole with both feet, let your-not-so-little-ones live with the result.

If your children then lack the money for another project or a weekend trip to the movies with friends, you’ve got to say, “Tough!” because a parental bailout undercuts the most important lesson: choices have consequences. (See: How To Teach Kids Comparison Shopping  and Holding Kids Accountable.

Anything Goes?

Make sure your children understand the difference between appropriate and inappropriate use of the gift.

T-shirts with suggestive words or images are out and drug paraphernalia such as roach clips masquerading as jewelry is prohibited. Books? Hoorah! But remember that part of being a kid is shocking the delicate sensibilities of your elders – that’s you, parents – and give your kids the freedom to be, well, kids.

Such silliness is an important step as children define themselves as they grow up. However, smart parents understand the difference between a child’s need for routine adolescent rebellion and promoting self-destructive, dead-end behavior.

The Importance of Thanks

Finally, be sure your kids say thanks – and put it in writing. A phone call is only the first step in acknowledging the gift. Insist that your kids write a note to the grandparents thanking them for the money and telling them how it will be used. Then have your children trot the letter to the mailbox. Be sure the note is dated and signed because you can bet the grandparents will save it. Teaching Children How To Thank Others can give you more specifics.

Learning how to handle money is an important lesson – and one of the most valuable gifts you and the grandparents can give your kids. Birthdays and holidays are a good time to start. This means you’ll never have to hear, “Mom, all my friends have one!” or “Dad, that’s so unfair!” See: Getting Started.

Help teach your kids about money at MinyanLand.com.