Having allowances can help children understand the concept of budgeting and saving, but you have to teach them.

If you decide to give an allowance, start one as soon as your children start recognizing money's worth - kids do this fairly early. Janet Bodnar, senior editor of Kiplinger's personal finance magazine in Washington, D.C., stresses two points in her book "Dollars & Sense for Kids":

* Don't give an allowance until children are old enough to manage it, or until your children are at least six years old.

There's no need to rush things and preschoolers generally don't understand the abstract idea of money anyway.

Once children start first grade they begin learning about money in school, so they know if they get a $1 bill each week, it's equivalent in value to ten dimes or four quarters.

* Keep the system simple so you can manage it. "Denying kids an allowance doesn't make it easier to limit the amount of money they get their hands on," says Bodnar.

Because most children will get the money out of parents anyway, it's better to teach them how to manage it themselves than allow them to nickel and dime you to death.

Plus, using an allowance gives parents and children more control over the children's finances.