At ages six to 10, children should be free to spend allowance any way they wish, even if you think an item was foolishly purchased. The Moes conclude, "Let him make his own mistakes now while the stakes are small!"

As a parent you may fear your child will be adversely influenced by peer pressure when deciding what to do with the allowance; however, Dr. Beeghly says that in spite of a child spending more time with siblings and peers than with parents at this age, the parents still have the strongest influence.

"Peer pressure has a big impact. It is very heavy on children, but how it affects a child and how he spends his money still depends on the family's values."

Working parents receive paychecks at the same time and place each week. Children also should receive their allowance regularly. You and your child should decide together on the time and place. As the Moes explain, "This is the child's first introduction to a consistent, reliable form of income."

Withholding the allowance should never be used as a form of punishment. The child might get the impression that the only consequence for indulging in unacceptable behavior is to be penalized a dollar.

Teaching How to Save

After your child has had some fun with pocket money, he is ready to learn some of the things money can do for him. Berman urges parents to teach children how to save. "Allowance is part of spending, but it is also saving and learning about money," she says. "Americans don't save; they buy. It is important to make savings a habit. From the child's weekly dollar, 10 to 20 cents should go to savings."

"Kids vary on the desire to save versus spend," says Dr. Beeghly. "Again, kids tend to incorporate the family values. If you are savers, chances are your child will be, too."

Most banks encourage parents to help their children open up small savings accounts. Under some states' laws, savings accounts for anyone 18 and under are not subject to minimum deposit requirements or service changes as long as the account is in the child's name and social security number.

Tellers may frown on taking deposits of 10 to 20 cents. Your child can save regularly in a piggy bank at home; when it fills up, roll the coins in paper tubes and take them to the bank.