Allowance time
There's general agreement that children should have allowances. But should allowances be linked to doing specific chores around the house?
While it is a personal decision, the concept of giving an allowance and having additional "work income" usually is the best concept.
If you make an allowance contingent upon household chores, the child may start viewing the payment strictly as payment for a job. For example, if your son or daughter gets a job helping a neighbor, he or she may stop doing household chores, figuring it's more fun next door than doing the dishes or cleaning house.
An allowance should tell the child that the money represents a specific share of the family's income; household chores, on the other hand, represent the child's duty as a family member.
A child's first year in school is about the time he or she should begin receiving an allowance and with it an ongoing course in how to spend, budget, and save money. Communicate with children, as they grow, how you and your spouse handle money. For example, if you constantly use credit cards instead of cash to pay for purchases, as your children get older, they may feel they have the right to do the same without thinking about the ultimate expense of the items purchased.

How much is enough?
A parent should consider the child's routine expenses, such as school lunches, and then include a little extra for some, but not all, youthful diversions. There should be a clear understanding of what is being paid out of the child's allowance.
Designate a specific "allowance day" and stick to it each week. Emphasize that it is their money to manage, and try not to be concerned if all the money is spent the first day or two. Also resist the temptation of lending money to your children when they deplete their allowance.
Whenever possible, keep the amount of the allowance similar to that of friends. If you cannot give a comparable allowance, explain why in simple, matter-of-fact terms and try to avoid feeling guilty. (Southern teenagers receive between $30 and $38 a week, according to a survey by Ohio State University.)

Emphasize savings
Think about opening a savings account for your child by about the ninth birthday, and help him or her understand that money in the bank will earn interest and grow.
When giving children an allowance, give the money in denominations that encourage saving. For example, if the amount is $5, give out five $1 bills and urge that at least one be set aside in savings. Some parents offer to match what children save on their own.

Teach investing
When it comes to investing, youngsters may have a harder time understanding the principles. Although minors technically can't make any investment decisions before age 18 in Kentucky, parents or grandparents can buy securities or mutual funds for them under the Uniform Gift to Minors Act.
Earnings of up to $1,500 in these accounts are taxed at a very low rate; children age 14 or over are taxed at an 8 percent rate on investments held at least five years, regardless of the amount.
Consider buying mutual funds that permit purchases in flat dollar amounts. Or check out www.buyandhold.com, which does the same for a minimum $20 investment.