In our house we started giving allowance when our daughter turned four. We give her $5/week. That is her money, for her to do what she wants with. With that she also gained the responsibility of buying her own non-essential things. For the first year she just stashed the money in a piggy bank and watched it add up. Occasionally she would ask us if she could get something when we were out shopping and we would ask her if she brought her money with her. If not, then she wouldn't be able to get anything. We then got in the habit of reminding her that she might want to bring her money when we went out. This works so well for avoiding those in store arguments/pleas for toys, etc. By the holiday season the first year of allowance she was able to purchase small gifts for our immediate family with her own money. She was very proud of that. She continued to save her allowance, tooth fairy money and gift money for the remainder of the year. By her fifth birthday she had saved enough money to buy an American Girl Doll! We took her to THE store and she picked out just the doll she wanted. She was so excited to pay with her money.
That was about the time that I thought that there may need to be a little more direction/teaching with the allowance she was getting. We started by reading a book called Give A Goat. It is about a class who raises the money to buy a goat through Heifer International for an impoverished family in Uganda. The story really interested my daughter, so we next checked out the Heifer website. That is where we found this video, for children, about buying animals for people who are less fortunate. The video sealed the deal, and Isabel was then determined to buy a water buffalo for a less fortunate family.
We got three big jars and made labels: Spend, Save, Give! We talked about why it is good to save a portion of our money for things don't already know we will need. We have a portion for spending as we wish and the rest for giving, as in buying a water buffalo. Now she divides the money: $2-saving, $2-giving, and $1-spending. Next month she is planning a a lemonade stand; she will put all her earnings from that into the give jar!
Allowances can teach so many things to a child. They valuable and necessary parenting tool. Next we will try HUGS!