It’s important to teach your children how to budget wisely while they are still young, but how can you teach them to save money if they don’t have any? Allowance is one way that you can provide your children with money of their own to manage while you help them to learn by doing.

Setting an allowance amount

Set an allowance amount that is reasonable for your child’s age. Ten dollars a week is too much for a three-year-old but may not be enough for a 14-year-old. Consider your child’s age and the types of things he or she is likely to buy:

For what expenses is your child responsible? If you expect your child to buy personal-care items and most of his or her clothes, you will need to provide a bigger allowance. My son is only responsible for his entertainment purchases, which means that most of the time he buys his own video games, music, books, and movie tickets. Twenty dollars a month is sufficient for him right now.

Do you have other spending requirements? My son is required to pay tithing as well as set aside 20 percent for long-term savings. If you have these requirements, you need to make sure that your child has enough money to feel as though working toward his or her own goals is feasible while still learning good habits like charity and saving.

Whatever amount you decide, be sure that your child understands the expectations that come with an allowance.

Should you pay allowance for chores?

Generally speaking, there are two main camps when it comes allowance: Those that base it on chores performed and those that make it automatic.

On the one hand, many parents don’t want children to think that money is free. Tying allowance to chores requires children to work for their money.

On the other hand, some parents avoid tying allowance to chores because they want their children to understand that pitching in around the house is just part of being a family.

This choice weighed on my husband and me as we tried to figure out what to do about our son’s allowance. In the end, we decided to give him a somewhat modest allowance automatically. As he’s grown older, we’ve explained to him that the allowance will end when he’s old enough to get a real job.

In the meantime, our son’s smallish allowance is enough for him to purchase a few items occasionally, but if he wants something bigger, he needs to earn extra money—and we encourage him to do so. He can achieve this by doing well with 4-H projects and earning ribbon money as well as by taking on extra chores for my home business, like shredding documents and filing.

Our compromise combines both methods. We’ve made it clear that he’s not getting paid for taking out the trash and unloading the dishwasher; these are things he’s required to do as part of the family. I don’t get paid for vacuuming, and my husband doesn’t get paid for doing the laundry.

The main thing is that our son has been learning lessons about money management that will serve him well in the future. He’s also learning about priorities, carefully considering his purchases, and finding ways to make more money. These are lessons that, hopefully, will create good habits for his financial future.

How do you deal with your kids’ allowances?

Miranda Marquit is a freelance writer and professional blogger specializing in personal finance, family finance and business topics. She writes for several online and offline publications. Miranda is the co-author of Community 101: How to Grow an Online Community, and the writer behind