(CBS) Most families with children pay them an allowance. I am a big fan of doing this, as it's one of the best ways I know to engage children in the process of making spending and saving decisions.

It's also a great tool to teach responsible spending and saving actions that can build the foundation for sound financial behavior in the future. But if you do pay your kids an allowance, what is the right amount to pay? What do you pay an allowance for? How often should you pay — and when should you stop?

Of course, not all parents and families provide an allowance. The decision to do so depends on personal and economic circumstances, and I respect the choice made by many families to not pay an allowance. Since there seems to be a wide variety of thoughts and opinions on this issue, it's helpful to consider these things if you do provide an allowance or money to your kids:

Teaching Big Lessons With Small Money

Strictly defined, an allowance is a sum of money regularly provided for personal or household expenses. Let's face it: We all have needs and wants. Kids have theirs — and some of those cost money. According to a 2005 report by research firm Yankelovich, about 58 percent of the children surveyed reported getting an allowance.

One of the reasons to pay an allowance is to use it as a tool to engage children in the process of learning about spending, saving and giving. Paying an allowance provides a way to get children involved and creates "ownership" of the decisions they make when they're using their own money.

It's also important to look at an allowance as a tool to allow children to make some money mistakes — and you have to expect them to make some. In essence it is a way for them to learn big lessons with small amounts of money at an early age. My view is that it is better to make mistakes earlier with small amounts of money than make mistakes later in life when the amounts involved can be much larger.

When To Start

This is a tough one for many people. Most parents begin giving an allowance to their kids by age 6 to 8. It's not the age but rather the aptitude that matters — when your child begins to understand that money can be exchanged for things he or she wants, then you will know it's time to start discussing the concept of an allowance. Remember that money and paying for things is an abstract concept; some children will show an interest while others will not, so be flexible.

Also, paying an allowance will give children and you more control over their money — if you don't pay an allowance, they may still get money out of you for the things they ask you to buy for them anyway.

One of the benefits is that an allowance shifts the spending decisions from the parents to the children, particularly when it's clearly communicated that the allowance is provided in lieu of the parents paying for the discretionary wants of their child.

What To Pay For

The reasons some report for paying an allowance range from pay for picking up their room to getting good grades. Ultimately is a personal decision — but before you decide, it is important to be aware of the behavior that this transaction can encourage.

For example, if you pay your kids an allowance for doing household chores, then what happens when they later begin to earn more money from a job outside the home? Is the only consequence for not doing chores the loss of an allowance? Experts agree that the reward for doing chores is the fulfillment of each individual's responsibility of being a member of the household, not an allowance.

Some parents think it's a good idea to pay for good grades, which after all, is similar with how most adults are rewarded in their working lives. Again, most experts agree that it's not a good idea and that it can undermine the virtue of working hard to improve oneself. A better consequence of a lack of effort on household chores or schoolwork should be the loss of privileges, not the loss of an allowance.

It's also important to be consistent within the family. Paying a regular allowance to one child and handing over money whenever asked by another will foster different money habits between children of the same family.

Parents whose children express concern over not getting an allowance can find this useful: About 42 percent of the children in the Yankelovich survey reported that they don't receive an allowance. The reasons parents do not provide allowances includes that they provide generously for sports, activities, transportation and other expenses. If this is your decision, it's a good idea to let your children know that is in place of an allowance.

What's The Going Rate?

The typical advice is either $1 per week for each year of age, or 50 cents per week for each year of age — though neither of these rules are of much help.

The Yankelovich survey indicates the following results for ranges of allowance amounts paid:

42% receive nothing

8% receive less than $5 per week

19% receive $5 to $9 per week

17% receive $10 to $19 per week

9% receive $20 to $49 per week

1% receive $50 or more per week

This indicates that for more than half of those children who report getting an allowance, the going rate is $5 to $19 per week.

The amount children get is affected by their age — start with smaller amounts with younger children and gradually raise the allowance each birthday. Amounts can also vary by the family's economic situation: Children from families in areas where living costs or incomes are lower may receive smaller amounts. Family size also matters; where there are more kids, it may be impractical to pay "the going rate" to all children in a large family. The point is that there is no hard and fast rule here.

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