Kids and Allowances

My kids are not old enough yet but they are getting there. Boy I can"t wait to shell out a few more bucks per week to my offspring who don"t do anything but eat my food and scrape my walls! But seriously, allowance can be a great way to teach children about responsibility and money. The real important thing that I have heard about allowances is that you should never give them to your children in exchange for chores. Chores are a responsibility. And allowances should be part of the agreement between you and your kids.

My parents never gave allowances. I had chores to do and when I needed money they gave it to me. As long as I stayed out of trouble, did well in school, and didn"t go blow my money on stupid stuff, the money was always there when I needed it. Of course, I never had the opportunity to work for something until I was 16. And even then, I wasn"t really working enough after school to ever accumulate anything. Of course when I went to college and had my first checking account I bounced 3 checks and went broke in 6 months.  

One great idea I heard from a friend who heard from someone else was to treat allowances like a 401k plan. For every dollar that their kid kept and did not spend after a certain vesting period, it would double, triple, or quadruple in size. This teaches your kid how valuable saving is and gives a quick lesson in compounding interest.

Here"s an interesting Allowance Calculator from About.com. 

What have you other Noodads done?