As Kelly turned six, we realized she was ready for an allowance. I don't think there is any perfect time or way to do it, but we are pretty happy with our approach. We wanted to instill a sense of responsibility to 'earn' her allowance and also give her an idea about saving money.

We needed a few things to make the process work: 1) Responsibility Chart - There are many versions of these, mine was bought at a local crafts fair and is made of felt with Velcro buttons to mark her accomplishments. Mine is from Alma's Designs 2) ATM Machine - Several stores carry versions of these; ours is from Target. 3) A 'real' savings account at our local bank.

Here is how it works. Each week we take a look at her chart and talk about what she did and did not accomplish. Based on how she did, we first determine how much of her $6 allowance she will get, e.g., last week we told you that you needed to remember to make your bed and you only did it half the time, so you will only get $5. Then we set some basic priorities for the next week, e.g., please practice your piano at least three times next week or you will get $1 less allowance.

Her allowance is then divided into three buckets. The first $2 goes into her bank savings account, the second $2 goes into her ATM, and the remaining money can be placed in her wallet. The wallet money can be spent (almost) any way she wants on treats, gumballs, etc. She can save up her ATM money and spend it only on larger items that cost at least $5. The bank savings account will accrue until she is 16 (or 18, we haven't decided).

Yes, it is a little complicated but she seems understand it and is really getting into it more and more each month. She understands that she has to do something to earn the money and is slowly comprehending the three categories. So far, to our amazement, she has not tapped into the ATM money. Wonder what fabulous girly things she will decide to buy with all those one dollar bills!