I think the most important thing is to have AN approach and to apply it consistently. Although it's perfectly appropriate to fine tune it along the way as you get more experience and the kids mature – just don't be ad hoc! That just models poor habits and leads to a lot of friction – particularly with teens.

Learning to be financially responsible (and charitable!) is a critical life skill. Honing skills takes practice. Putting a consistent allowance and/or chore system in place with your kids is a great way for them to learn the skills, practice them, and (inevitably) make mistakes in a friendly environment (or presumably a more friendly and nurturing environment than what they'll encounter in the real world – think credit card companies!)

Where to keep the money? We found keeping it "in the mom or dad’s wallet for safekeeping" really didn't scale well. It gets very hard to keep straight. Having 5 kids, it became particularly unworkable for us. Being a software geek, I built a little web application to help simplify things for my family many years ago. Seeing the positive effect this had on my kids over the years, I ultimately decided to dedicate my profession to this endeavor and took the last three years (along with my old college roomate and computer science colleague) to build out a pretty elaborate "online virtual bank" at http://www.famzoo.com. After testing it with 100+ charter families, we finally launched last month. We'd be delighted to have people check out our tour: http://bit.ly/aijBY7 Tell us what you think.

To be fair, ours is not the only game in town, so look around at other services and compare to determine what works best for you. I'll just say that using such a service really simplifies the process and helps you be a much more consistent and effective mentor in this area to your child.

Regards,
Bill
Founder, FamZoo.com

HIllary

I am so grateful that my VERY loving parents took the time to teach me about money.

Ask any 20-something trying to dig themselves out from loads of consumer debt — I suspect they would say that, in today's world, handling money responsibly is an important life lesson (or even a survival skill). And it's one that loving parents should be teaching their kids.

I was three years old when I was given my first weekly allowance – just enough to buy an ice cream sandwich each week at the grocery store. Or I could save it for a few weeks and buy a small toy. I can still remember trying to decide between spending on something small or saving for something bigger. The choice is the same today, although the numbers have more digits now!