Age-by-Age Guide to Giving an Allowance

Many tweens and teens are budding entrepreneurs with ideas for profitable endeavors. Encourage and support their efforts, but allow them to shoulder the bulk of the responsibility. In other words, if they want to start a lemonade stand, buy the lemonade, but let them make it and sell it. It might be wise to ask them to pay you back for your initial investment as well.

"All children's personalities differ," says Dr. Beeghly, "and how they handle money will differ as well. Some kids are cautious and might be more willing to save while others will spend." Dr. Beeghly concludes it is the family relationships and the modeling of the parents which will determine a child's money sense.

In a recently published article in MONEY magazine, the objective of an allowance was defined as a way to develop financial self-reliance in children. "By the time your child is college-age he should be able to manage a year's expenses on his own."

Children who develop financial responsibility early will reap its benefits the rest of their lives.