Allowances and earnings are effective tools that can be used in positive ways.

Having an allowance, and living within it, is one of the best experiences children can have. Help them, as soon as they are able, to differentiate between the coins. This may be as early as age 4 or 5. By the time children are 6 or 7 they may be able to handle a basic allowance to cover their needs, plus some for personal use, saving, and sharing.

When preteen children are able to list their needs and rank them in importance, they can help determine their allowance needs. They learn that income first covers needs, that money is a limited resource, and that the family's financial situation affects the amount each member can use. After guidelines for using allowances are set, children will want to decide how they will spend it.

Parents who do not feel they can "afford" an allowance will find that the money they have been doling out upon request and for special occasions is probably more than a predetermined allowance would amount to. Parents need to provide their children with the money management experience that an allowance offers.

Rather than reward or payment, or even a share of family income, the allowance's real purpose is as a teaching tool to provide money management experiences for children.