I’ve written about this elsewhere, but I thought it would be worth pulling together my thoughts here… Awhile back we decided that the time was right to institute an allowance system at our house. After thinking it over, we decided that we’d provide the boys with $0.50 per week per year of age, which means that our four year old gets $2/week, our five year old gets $2.50/week, and our eight year old gets $4/week.
In order to teach the kids about the value of money, as well as to instill in them a sense of civic responsibility, we divide their take into spending money (60%), long term savings (30%), and charity (10%). They have free reign over the spending portion — they can blow it as they get it, or they can save up for something a bit bigger. Their long term savings (destined for college, or something equally worthy) goes into a high yield online savings account at ING Direct ($25 account opening bonus), and we let the charity contributions accrue for awhile before letting the kids each pick a charity for their donations. As far as responsibilities go, they’re expected to pitch in and help out around the house (in proportion to their ages/abilities), but they don’t have a specific set of chores that they have to complete in return for their allowance.
All in all this system has worked out really well for us. The boys have stopped asking/begging for things in stores because they know that it’s up to them to save up for something if they want it. And they’re astonishingly good at it! Our eight year old has already saved up for some pretty big ticket items, including a portable CD player and a Nintendo DS — that one took months of no spending, saving birthday money, etc. — and our five year old has saved up for some GameBoy games. They also LOVE to log in to their bank account and check out how much interest they’ve earned, and they have a great time picking out their own charities (with some help from mom and dad, of course).