There are several schools of thought about giving kids an allowance. I don't know that we've picked one yet and really, really stuck with it, or if what we've tried is the right choice for us or anyone else. But I'll share with you what we're doing recently and how it's going.
Basically, we want our kids to understand that our home is a blessing to us from God. He has allowed us to live in His house here, as long as we take care of it. That includes all of us. We are a family and we work as a team. This point is stressed and demonstrated to the kids all the time. We are a team. We pull together no matter the circumstance.
So as stewards of this home we are allowed to live in, there are things that are expected of all of us to maintain it, to make it a place basically ready to be hospitable to guests that the Lord would send our way and to show God that we are responsible with what He has given us, so that He might trust us with more in our lives that we can use to glorify Him even better.
Okay, great. That covers the "everybody helps out to keep the house picked up and in working order." But what does this have to do with allowance?
In this world, everything costs money. Learning to be good stewards of money doesn't happen all at once. We need to learn to be trusted with a little, so we can show God we can be responsible with more before we will be blessed with it.
Sounds kind of similar, doesn't it?
We do not give kids an allowance. Confused?
We don't pay them to do jobs that help our family-team to maintain our house. We are all expected to do that. So we don't make that responsibility about how much they'll get for doing it. We do it because God expects us to do it. We build our treasures in heaven for doing what we're expected to do in this life.
However, when kids go above and beyond and really shine in their efforts, we often bless them with some income. Z is the only kid who willingly goes and mows the lawn. Since it's not a normal household chore and no one else besides C is willing or able to do the job, Z occasionally earns $5.00 for doing it. That's not every time ... but sometimes, we choose to reward him for this extra effort.
S helps me every day with E. I rely on her quite a bit. So for every day she helps me, she earns $5.00. But if S is gone for most of the day volunteering at the farm, hanging out with a friend or gone at summer camp (or whatever), she does not earn the money. I don't pay her if she doesn't show up and put in the extra effort. E is not a household chore. She is my responsibility in the day, but knowing I can't handle doing everything on my own, it is worth it to pay S for the extra help.
When we held a family yard sale, every child who helped prepare for the sale, who helped during the sale (and clean up at the end), we gave them each some of the profits from the sale. The yard sale was a lot of work beyond our normal responsibilities for household upkeep, so we wanted to bless them for their efforts and their attitudes.
So, week to week, they earn treasures in heaven and the family's respect for helping the team. But when they go above and beyond the normal responsibilities, we bless them with cash in their bank accounts.
What do they do with that money? We like to teach them about tithing, from an early age. We want them always to remember that what they have is really the Lord's and it is an act of worship to the Lord to be able to give a portion back to Him.
After tithing, we teach them to save half (later in life, this amount will surely change, but as kids, they really don't need to cover as much of their own expense). The length of time they should save varies. We do try to inspire them to have long term savings, to use on their future car or house or whatever, but often, if they save up for a few months at a time, we feel this is satisfactory to teach them the principle. Then they use these savings to purchase something they've been "saving up" for or at a holiday as gift money for others (also encouraged).
Finally, after tithing and saving a portion, they can spend the rest if they wish. Sometimes they just save it all. But sometimes they want a pack of gum or some other impulsive purchase and I think that's okay. It's "normal." Life is for enjoyment, too. Not everything is about teaching the kids something.
Anyway, that's about all I have on this subject. Not sure if this is helpful to anyone, but it's what works for us.
Here's a silly little video one Lego-loving kid created about tithing that I found on youtube. I thought you might like to see it: