About one-third of parents exchange allowance for household chores, though many experts recommend keeping the two separate. "Kids have chores to do because they’re part of the family," says Sears. If chores are tied to an allowance, your child could expect to get paid any time he takes out the trash or carries a dish to the sink.
What Allowance Should Cover
In general, school-aged children are too young to manage a budget for clothes or other essentials. However, choosing when to buy candy or games is good training for young kids. They may be unhappy but they won’t be harmed when they run out of funds for these purchases.
As your child gets older, you can increase the amount of allowance to cover more things, like movie tickets. By the tween years, your child may be ready to manage a clothing budget.
Teach Children to Save
Commercials and pop-up ads can fill your child’s head with ways to spend money. It’s up to you to teach her how to save. Fay suggests that 10% of a child’s allowance go into savings. At first, you can encourage your child to save up for small ticket items, like a $3 pack of cards. As your child gets older, he can set his sights on things that take longer to save for.
Kristin Johnson and her husband instituted a "Spend, Share, Save" policy for their sons’ money. One third of any money her kids receive is theirs to spend, one third goes to the charity of their choice, and one third goes into savings. "We have no input on the spend choices, guide/encourage the share choices, and have full veto on the save choices," says Johnson.
If Your Child Wants More Money
What if you are giving your child an allowance that meets your budget and beliefs but your child wants more? This is a good time to talk to your child about earning additional money. Fay suggests keeping a list of ‘parents’ chores’ on the refrigerator. "You don’t get paid for chores, but if you want to do your parents’ chores, you can bid on it."