10 Financial Events to Plan for in Your Children's Lives

Giving your kid an allowance can teach him about handling money, but you need to be consistent with it. ©Stockbyte/Thinkstock

An allowance can be a great tool for teaching kids about money as they explore the cost of things and learn about delayed gratification by saving for expensive must-haves. An allowance can also help save your sanity, as it reduces your kids' insistence on having you buy them the latest and greatest -- at least by a little.

Some say it's not the allowance itself, but the time spent by parents on the educational aspect of money that's most important. But we're looking at expenses, not philosophical questions here. So, how much should you give a child for an allowance? When should you start? Should you tie it to chores? All of these questions have pros and cons and should be considered in the context of your own family.

That said, experts generally agree on a few things related to allowance. First, plan ahead so you can use an allowance as a teaching tool to help your kids understand budgeting and money management. Second, set up the rules in advance about what the allowance covers. Consider whether your child should save or donate a portion -- or whether the allowance should be based on chores. Third, start as soon as kids are old enough to know that things cost money and recognize the difference in coins and bills, somewhere between the ages of 4 and 7. Finally, be consistent. Give the allowance on the same schedule every week or two weeks.