When you think back on your childhood, most of us had some sort of an allowance when we were kids. Now as a parent, the decision of whether or not to give your children an allowance and figure out how much to give them might be more difficult than you think it will be.

Think of your child's allowance as their share of the family income to spend how they see fit. There may be certain fixed expenses or "bills" they have to pay for, such as school lunches, or bus fares out of their allowance. But be sure that you always leave some money for discretionary spending. This approach helps them to understand the process that you go through each month with fixed bills and variable expenditures.

How Much Allowance Is The Right Amount?

Sit down with your child and estimate the amount of expenses they have during an average week. It is a good idea to pay allowance on a weekly basis. This lets them get used to a scheduled "pay day" of when money will be coming in. When looking at the expenses and coming up with an amount, be sure to discuss and establish ground rules as to whether or not you will pay extra to cover special events or if that needs to come from their allowance.

You can also build into their budget and expenses, saving money for a specific large purchase. Maybe they have been eyeing an iPod, or a cell phone, and need to build up some savings to make the initial purchase. That can be labeled as “an expense” in their weekly budget that they can save for.

Plan to review the allowance on a regular basis. This allows your child to plan ahead. Most child development experts agree that tying allowance to household chores is NOT a good idea. There are responsibilities that each member of the family has and these should not be paid for. However, if there are additional or one-time chores, then as extra-credit you can pay extra for them. Similarly allowance for good grades is not considered to be a good idea.

Once your amount is established to cover your child's expenses and periodic reviews are set up, they will be ready to learn about budgeting their money and planning their spending.

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