Check out Amy's Saving with 6abc article, Help kids track their allowance money.
A little fewer than half of them received allowance. The amounts ranged anywhere from a quarter up to five dollars a week. Some of the kids had to do chores to get their allowance, others did not. Clearly, there are no hard and fast rules about when to start giving children money and how much to give them. Personally, I feel that children should get allowance, as long as they 1) have to do something to earn it and 2) learn some money-management lessons in the way they're allowed to spend it.
For the same story, I also interviewed Mike Glozman, founder of the website Cheapstingybargains.com. He and his wife recently started giving their four-year-old son an allowance. But they have a very interesting way of teaching him about money in the process. He has a bank that's divided into three sections. One is for spending, one is for saving and one is for giving. His allowance is split among those three sections. The money in the spending section is his to use however he wants. The money in the saving section is for long-term expenses (like his college fund). And the third section is money that goes to charity. He may not understand all of that quite yet, but clearly, they're making a great effort at teaching him valuable lessons about money, even at his very young age.
The allowance-tracking websites that Mike and I spoke about reinforce those same lessons. On some of the sites, parents can make lists of chores and rewards. That enables children to see how much they're "earning." A chore can be anything from making the bed to helping clear the table, to mowing the lawn or babysitting – depending on your child's age and ability. Some of the sites also allow parents and kids to divide their money, similar to the Glozman Family's three-part bank. For older children and teens, one site even links to a real debit card, to give young people some real-world experience. (A warning though – if they overdraft, you, as the parents, are responsible for the fees. It could be an expensive lesson!)
And while special banks and websites are great for helping children learn about saving and money management, many child-rearing experts agree children really learn a lot just by watching their parents. If you buy everything you want on a whim, without considering whether you really need it, or comparing prices, chances are your child will spend a lot of his or her money the same way.
Paul Petillo, who wrote a great article on the subject of Kids and Money for The Dollar Stretcher website, has some guidelines for parents who want to encourage their children to money-savvy. They include saying "no" sometimes, when children want something on a whim. He also says parents shouldn't spend more money than they have on their children. This helps children understand limits. And he advises rewarding good behavior with small gifts, so kids relate good effort to rewards.
My sons use their allowance money for things like video games, going to the movies, and after-school snacks when they go out for friends. They find their allowance docked if their rooms get too messy. If they want something I consider a luxury (like fancy sneakers), they have to pay the extra cost. Our system seems to be working – they now comparison shop (just like their Saving With 6abc Mom!) and have learned to save when they want get something big (like a new game for the Xbox). And I had a great experience a few weeks ago, when we as a family attended a charity event. It was a Sunday morning (which is when my husband usually gives the boys their allowance for the week). When my 8-year-old got his dollar, he put it into one of the charity boxes at our table. After hearing the speakers talk about needy families in our area, he said he thought they needed the money more than he did. Wow!
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