The morning we left for the mall, I never recognized the cliff I was about to jump off. I should have; I had been approaching it for several years. Instead, all I was thinking about was spending some time with my two young daughters before we went to a movie. By the time we made it home that night, our relationship had entered a new phase.

Let me fill you in on a few missing details before I tell you the rest of my story. Two years earlier, in 2004, in the way these things generally go, my marriage had imploded. Left in its wake was a load of debt, monthly child support checks, weekend visitation with my two young daughters, and a new career that was more fulfilling but came with a smaller paycheck.

I had worked hard since the divorce to be there for my daughters whenever they were with me. With my limited income, and probably a subconscious need to cement our new relationship, I bought them toys, took them to movies and museums, and generally spoiled them the way most fathers do with their daughters, especially divorced dads.

As we walked through the Target store that afternoon, my oldest child, Sophie, gravitated toward the toy section and picked up a “Polly Pocket” playset. “Daddy, will you buy me this?” she implored. As I mulled over my response, my other daughter, Savannah, yanked the nearest toy off the shelf, and said, “Daddy, I want a doll. If Sophie gets something, then I do, too!” That’s when it hit me—my daughters had no idea of the value of money or, more importantly, how to make tradeoffs and smart spending decisions. And, worst of all, it was my fault.

I stiffened my spine and told them “No” and dealt with the inevitable whining and complaints, then we headed off to the movie. But, once we got home, I found I could not fall asleep. Something had to change. It was time to shut down the Daddy ATM.

The next morning over cereal and waffles, I rolled out my plan to my daughters. “Ladies, I have made a decision affecting our future, and I want to tell you about it. From this day forward, except at Christmas and your birthday, I will never buy you another toy again.” You could have heard a pin drop, the silence was ominous; the look of disbelief was colossal. “Instead, I am going to let you be in charge of your own money. Starting today, you can buy whatever you want, with your own cash.” Their shocked looks softened a bit.

As I explained the finer details of my plan, both of them started to dream about what they were going to get first. In their minds, this was going to be a free-for-all. Daddy was giving them their own money.

The original plan

Here’s the plan I laid out for them:

Every weekend they were with me, I would give them their age in cash. Sophie was 8 and Savannah was 6, so $8 and $6, respectively.

They could spend it on anything they wanted; there were no limits.

I would no longer buy them new toys, candy, or gifts for friends’ birthday parties.

There would be no loans from the Bank of Dad.

That was it. The first weekend they were with me, they asked for their money immediately upon entering; I had it waiting on the dining room table in envelopes. One hour later, they were swapping Pokémon cards, eating candy, and toying with cheap trinkets they now owned.

The next afternoon, when we went to the movies, both of them wanted to stop at the candy store, and asked if they could get a bag of candy for the movie. I said, “Sure, I told you: It’s your money to spend as you like.” That’s when reality hit. They were broke. All of their cash had disappeared the day before in a frenzy of spending. With bright smiles, they asked me for a loan; they would be good for it next weekend. “Sorry, but I give no loans. Maybe next week you should plan out your spending better,” I replied.

We went to the movie, I bought popcorn and slushies (I’m not a monster!), and the rest of the weekend went off without a hitch.

Over the next few years, we had our ups and downs. They both got small safes for Christmas to keep their cash in. Sophie’s often had money in it; she quickly perfected saving her money. Savannah’s, on the other hand, was often empty; she was unable to resist the temptation of instant gratification. We had discussions, and occasional battles. When they had something big coming up on the horizon—a birthday party to attend—I would offer them the chance to earn extra money doing chores around the house. They learned what sales tax was one day, when Sophie had to return something to the shelf; she found that she didn’t have enough money to cover the sales tax once she reached the cash register. When they bought a new toy, they actually took care of it, because if it broke, they had to replace it.

As they entered middle school, my new wife and I realized that we needed to overhaul the system. Sophie and Savannah now understood the basics of money, but now they needed to comprehend banking, work, and the cost of things beyond toys. (We also were tired of nagging them to do their chores.)

Over a few weeks, we quizzed other parents in our social circle, gleaning any bits of budgeting advice they might have. Ever the planner, my wife took to reading any kind of budgeting articles she could find on the internet. In the end, we appropriated a system friends of ours had been using for their four children and tweaked it to match our needs.

The new plan would go well beyond toys. We would no longer be buying the girls any clothing, iPods, music on iTunes, or DVDs or bankrolling outings with friends. The house would always have food, and when we went to the movies as a family, we would pay for snacks, but that was it. It was time they truly understood what things cost and how to budget their money.

We rolled it out to the girls on a crisp, clear September afternoon around the kitchen table, before the start of a new school year. We would be dramatically increasing the amount of money they received each week, but now there were caveats.

They had to earn their money, much like a job. Just like in real life, if they did well at work, they would receive their salary; slack off, and they might find themselves broke. Each of them had a set list of chores that had to be completed each week before we would put any money into their newly opened checking and savings accounts. If they didn’t want to do their chores, we didn’t argue or nag—we just didn’t pay their allowance. Half of the money would go into their savings account for big-ticket items, and half into their checking for everyday use. They went to the bank with us to open their accounts and received their own bank cards. I would deposit the money into their accounts electronically.

Savannah being the younger of the two, and in sixth grade, would get $25, and Sophie in eighth grade got $30. My wife and I had worked out how much money we were spending on them each year, and divided it by the number of weekends they were with us. If they spent their money well, there would be no issues. They each signed contracts agreeing to the new terms, and we agreed that they would review the agreement each fall when the new school year began. Each kid was welcome to present her case for any changes at that time, but once signed, nothing would be amended for the full term.

Things were rocky at first. Savannah refused to buy any new clothes…until she finally discovered boys. Sophie immediately began to save for the newest iPhone, and three months later, it was hers. When either a holiday or a birthday approached, they coveted checks from relatives; the cash was usually put to good use. When we bought them clothes for gifts, they thanked us, now that they were able to understand the cost. Both girls discovered thrift stores and clothing swaps.

The best times were when either child would develop a PowerPoint presentation—kids these days!—asking for raises in their allowances. They were usually well developed and often successful. Being the children of divorce, they were well-versed in communicating their needs.

As both of my daughters enter adulthood, I can look back on their journey with pride. Sophie is a freshman in college, and has several thousand dollars in the bank earned from her job. (We stopped the allowance when she began working full time this summer.) Savannah is entering her junior year and still is occasionally impulsive with her cash, but she now knows very well that money is not free; you have to work for it. While she’s not all the way there yet, I have faith that one day soon she will have a healthy balance sheet, too.

Hudson Lindenberger is a full-time freelance writer who believes life is full of interesting stories that are dying to be told. He has been published in many national magazines and is the co-author of On Thin Ice.