An allowance for children is the first way most will learn the power of money. Teaching a child how to save and spend sets them up for behaviors later on in life. Children learn independence and the difference between saving and instant gratification.
Children, as a result of technology, see money coming from a machine after a card is inserted. They have no concept of from where it comes. Parents need to banish those ideas immediately.
It's up to parents to decide when it is appropriate. They need to add and subtract well. In order to decide if a child is ready, allow them pay for purchases and monitor whether they understand correct change.
In the real world, adults are not often afforded the luxury of buying whatever they would like at any time. This should be taught to children. They should be allowed to enjoy what they have but also understand that saving is a great alternative. When children see their parents using cards for money, they misunderstand that it has been earned and it can create bad habits. Let them know how the money gets there. When they are given a set stipend with nothing else to fall back on, it teaches a valuable lesson.
Open an account in which a child can begin to save on his or her own. Have them deposit a set amount each month. This teaches them the value of finance management. It is intriguing to watch money as it adds up. They should diversify and invest in other products like certificates of deposits and money market investments.
Parents should determine if an allowance for children is best by observing their behavior around money. Giving them money in which they will be responsible is key. Make sure to guide them and give them lessons to take well into adulthood.