Handing over cash every month to your child can teach them money management, responsibility and the consequences of bad decision-making.

If you are not giving your kids an allowance, you’re missing an opportunity to teach them a valuable life lesson.

Receiving a consistent amount of money to pay for their expenses, plus some optional wiggle room, teaches a child money management and the value of a dollar.

In short, it will teach her the absurdity of the $150 ripped jeans far better than you could ever convey.

Experts say providing an allowance is part of raising an independent child, especially if you let him decide how it will be spent.

On the other hand, doling out money for each request makes your child not a money manager, but a salesman and manipulator, says David McCurrach in The Battle Cry for Kids’ Money Management. Children need to learn budgeting and to make mistakes while the consequences are still minimal, McCurrach says.

The key for parents is to be flexible. Take time to plan an allowance system that works for your family, but don’t be afraid to admit that the kids may have outgrown the old system and a new one is required.

When to Start?

By 5-years-old, most children are ready to learn the consequences of spending all their money too soon or giving in to the temptation of instant gratification vs waiting and buying the better quality toy.

By the early teen years, kids can manage their own budgeting for a longer period, perhaps a month at a time.

Linking Allowance to Chores

If you think your kids should be responsible family members and do a certain amount of work around the house just because they’re part of the family, then you should not “pay” them for chores.

Some families put dollar amounts on certain chores: kids earn a little bit for making their beds every day and make more for mowing the lawn and doing bigger projects. The idea is that if they want more money, they’ll do more for you around the house.

However, kids quickly figure out they can lay off chores if they don’t need the money that week. Also, they’ll have a harder time learning money management if they don’t know how much they’re getting week to week.

Linking Allowances to Behavior and Grades

Many experts say allowances shouldn’t be tied to behavior. Being rewarded financially for being good sends a bad message about why they’re expected to behave.

The same can be said for grades: working hard in school should be done for reasons other than it pays well, and some experts say money is not a motivator in doing well in school.

Find the Method That’s Right for You

So what are you teaching your kids by giving them an allowance without earning it through work or good behavior?

McCurrach says, think of it this way: you’re already spending family money for them – buying their clothes, movie tickets, snacks, toys, etc. These things are already part of your family finances. By giving them an amount of money and letting them decide how to spend it, you’re giving them the responsibility of managing their own money.

Here are some methods that have been successful for some families:

The Jar System

Give your child four jelly jars and require that a pre-determined percentage of their allowance be divided into jars for Long Savings (long-term savings goals like college or a car), Short Savings (items being saved for, such as an expensive sweater or video game), Sharing (charity, friends’ birthdays), and Spending (toys, candy, entertainment).

This gives you broad control over what your children are spending on, but leaves much of the decision-making to them.

The Spending Plan Contract

If you’re looking for more control over how your child spends his allowance, you can set up a spending plan and outline specifically how you want your child to spend his allowance. This plan works better if you’re handing over a large amount of money to include all of your child’s expenses, such as school fees, sports equipment, clothing and school lunches.

The Salary-Plus-Bonus Combination

Figure out your child’s basic needs and give them that base salary, then at the beginning of the allowance period give bonuses for extra chores he’s done or good grades he’s received.