Should your kids get an allowance?

Yes, say most experts, stressing some guidelines: Start sooner rather than later, make sure the amount is age-appropriate, and -- believe it -- don't link the money to chores.

Most money experts agree that children should be given an allowance in order to learn financial skills at an early age.
"Giving your kids an allowance is the best money-management tool you can use with your children," says Janet Bodnar, the deputy editor at Kiplinger's Personal Finance.

Have you ever noticed that children will spend unlimited amounts of money as long as it's yours? "When it's their money on the line, children make more-informed purchasing decisions," Bodnar says.

The problem is that most parents resist giving children an allowance, and, if they do, they usually give the children too little. If the allowance isn't large enough for children to experiment with -- to make mistakes with -- it won't have the learning effect you'd like it to have.

How young is too young?
As soon as a child begins to express a sincere interest in material wants -- as in, "I want that!" -- it's time for an allowance. Depending upon the child, that's probably around ages 3 to 5.

The first mistake most parents make is starting too late. The majority of parents wait until their children are "tweens," 9 to 12 years old, and they miss out on the opportunity to discuss money with young children who are more apt to listen to, and take, their parents' advice.

By the time kids are teenagers, they have additional influences on their spending habits, including friends, advertising, pop culture and the media.

How much is too much?
The first question parents usually ask is, "How much allowance should I give my children?" Some experts recommend a weekly allowance that totals a dollar for each year of a child's age. But rather than determine the amounts by your children's ages or follow what other parents give their kids, make an informed decision based on what you expect your children to do with their allowance.

As your children get older, they will have to take on more responsibility for their spending habits as their allowance is increased. Decide as a family how the allowance is to be used. Will your children be expected to purchase movie tickets, clothes, birthday gifts for friends and school lunches? If so, the allowance has to be high enough to cover those expenses. Then, if your children overspend before the end of the week, they won't have any money for a movie or a trip to the mall on Friday night.

Tying allowance to chores
Many child-development experts agree that linking an allowance to the completion of chores is not the best approach.
"My recommendation is to keep the allowance totally separate from the chores," says Aletha Solter, a developmental psychologist and founder of the Aware Parenting Institute in Goleta, Calif. "That way, children will learn the value of cooperation and experience what it feels like to contribute to the family."

In addition, once children have other streams of income, such as monetary gifts for birthdays and holidays or a part-time job after school, they often balk at doing chores at home in order to earn their allowance because they are no longer dependent on Mom and Dad for all income.

Giving extra money for bigger chores -- not those that you expect your child to do daily or weekly -- is fine. For example, if Dad usually pays to get his car detailed once a year, he might be willing to pay for that task to be completed by someone in the family. Or if the children help with the annual "spring cleaning" of the garage, that might be worth greasing the palms of helping hands.

Age-appropriate expenditures
Even at a young age, children can begin learning about money:
Preschoolers. "Children as young as age 4 can learn coin recognition and basic financial principles such as the exchange of goods and services for money," Solter says.

The amount of money should be minimal because children at this age tend to lose or misplace money. That's OK. It's all part of the learning process. If your son is playing with a few quarters and loses them, he won't have the money to buy baseball cards or a pack of gum.

Elementary age. By 5 or 6, most children can understand the differences between spending, short-term savings, long-term savings and donating. If they sort their money into those four categories every week, they'll be developing responsible money-management skills. As they get older, children can begin paying for things such as their hobbies and gifts.

Tween years. At ages 9 to 12, children who have been given an allowance from an early age will be able to step up their responsibilities as the amount of their allowance increases.
Some tweens are ready to take on the challenge of purchasing their own wardrobes and paying for all of their entertainment expenses. Many tweens will feel empowered by their allowance, although they still will need constant supervision and guidance.
That's not to say that parents should stop them from making mistakes. Remember, the sole purpose of the allowance is a tool for learning good money-management principles. One of the best ways to learn is by making mistakes and dealing with the consequences of those errors.

Teen years. Most experts agree that by the time children are teenagers they are ready to receive a clothing allowance. So, instead of opening your wallet every time Junior wants a new pair of jeans, consider giving him a clothing allowance.
You may want to do this in two distinct clothing allowance chunks, rather than making it part of the allowance, since clothes shopping happens a few times a year rather than weekly. Let him use his clothing allowance the way he wants to, and when the money is gone, don't offer more -- even if he's forgotten to budget for a new winter coat and needs to wear his old one, which is ever so snug and showing its wear.

Freedom within limits
Some parents fear that giving children an allowance is like giving them permission to purchase whatever they want, whenever they want. Not true. The allowance gives children some freedom to choose what they want to do with their money, within your limits.

For example, you may require that a certain amount of your child's allowance be saved for college or donated to charity, or both. It's your call. And, as always, you set the limits on what's appropriate to buy. If your child is not permitted to watch PG-13 movies or play T-rated video games, then those are off-limits regardless of whether they have the money to buy them.

This article was reported and written by Lynne Ticknor for Bankrate.com.