Most parents who dole out allowances make fundamental mistakes that might actually hurt their kids' understanding of money, writes Ron Lieber at Slate. For one thing, parents usually start too late, for a variety of misguided reasons. The best time? As soon as the kids start asking about money, which might well be preschool. If not, start when the tooth fairy makes her first visit. "Rather than have them try to pull out additional teeth, as some do, best to begin allowance that same week." Figure a buck a week per year of age, Lieber suggests, and encourage the kids to divvy the money into three categories: "save, spend, and give," which is the "rough approximation of an adult budget."
If you can afford it, raise the allowance significantly as the kids age—figure out a clothing budget, for example, and hand it over in a lump sum to let them figure it out, even if they "fail spectacularly." Lieber also advises against linking the allowance to chores. "If you do, there will come a point when your kids have enough money and decline to do chores. What are you going to do then?" Kids, like adults, should do chores without pay. If they get lazy, it's better to take away privileges (like computer time or the car keys) than money. Allowances can be a powerful learning lesson, provided we give kids the "freedom to experiment—even if we don’t like their choices." Click for Lieber's full column.