An allowance is a tool that can help teach children financial responsibility. As a parent, you may wonder when to start giving an allowance, how much to give and if children should earn the money. Learn some quick tips as you consider setting up these guidelines with your kids.

An allowance is more than free money you give to your children. A regular allowance helps children learn how to manage money while they're still under your parental guidance.

In addition to money management, children learn other essential financial skills as they spend their allowance. They can discover how to live within their means, create and follow a budget, delay gratification, and help others through charitable giving.

To teach your children financial responsibility, set up a budget together. Encourage your children to record their expected expenses, short-term savings, long-term savings and charitable giving.

Young children can use a digital or paper ledger or piggy bank to track allowance categories. Teens may open a bank account and access more complex bookkeeping software.

Keep in mind that your children will decide how to spend their allowance and may make mistakes as they learn financial responsibility. Schedule regular allowance meetings to discuss your children's financial views, habits and decisions.

Generally, children between the ages of five and seven are ready to receive an allowance and manage money. However, you know when your children are old enough to understand how money works. They should be able to identify dollar and coin amounts, count to 100, and understand concepts like spending and saving.

Because an allowance is designed to teach your children financial responsibility, you'll have to decide if they need to earn it or if it's a gift. Here are three suggestions for how your children can earn their allowance:

1. Offer allowance as a gift.
Your children will always receive their regular weekly allowance. This money is not tied to chores, grades or behavior.
2. Pay children to do extra chores.
As contributing household members, your children probably have regular chores they're expected to complete each day or week. They can earn an allowance when they do extra chores beyond their regular assignments.
3. Withhold privileges, not money.
If your children break a household rule or otherwise misbehave, withhold a privilege rather than their allowance. The purpose of an allowance is to teach money, not behavior management.

To determine a fair allowance amount, there a few factors to consider, including your children's ages and what you expect them to buy with their money:

1. Consider your family's income.
Only give your children an allowance you can afford. It's okay to have an honest conversation, especially with your older children, if you need to downsize the allowance amount.
2. Match your child's age.
The allowance could match your child's age, dollar for year. Under this guideline, an eight-year-old would receive $8.
3. Divide the allowance into thirds.
Give children enough money so they can save a third, spend a third and donate a third to charity.
4. Pay for day-to-day expenses.
If you decide to give your children enough allowance to pay for their day-to-day expenses, the amount will be fairly high. This strategy may work best for teens who are close to financial independence.

Teach your children financial responsibility with an allowance while you still have influence over their saving and spending decisions. The above allowance guidelines will help you determine why, when and how to give your children the money they can use to develop important money management skills.