TEACHING children about money is no child's play.

Children must be battle-equipped on how to manage money as they grow up and it's up to the parents to provide them the necessary tools.

Using the allowance system to teach your kids about money is one way to go.

The upside

The fact is there are many benefits for parents who "pay " allowance to their children.

"When it's our money, our kids want to buy everything in sight, without even a care in the world of how much money we had to put out for them," says Abby Lim, a retail manager for a textile store.

"But when it comes out of their own allowance, they think twice before buying," she adds.

She says parents provide for necessities such as food, basic clothing and school supplies, whereas the allowance will be mainly for the "extras" the kids want.

"These extras can be from toys, video games, movie tickets, fast food or anything which are not a necessity, but a nourishment to their childhood," she says.

"Basically we are not stopping them from buying toys, we are teaching them the concept of budgeting at an early age through allowance," she adds.

She says that it's normal for kids to make mistakes and deplete their allowance in an instant after getting the money.

"This is a learning process for the kids, as they soon realise that money is not infinite, that when it comes out of their own pockets, they become much more selective about their purchases," says Lim.

Figure it out

New parents have to figure out how much to give their children.

Lim says the amount should be large enough to allow the children to experiment. In her case, she gave her two children a weekly allowance of $10 each, but as they entered secondary school, she decided to give each $50 a month.

"From the beginning, I would advise my kids the amount should last them throughout the given month. I would refuse to restore their allowance until the beginning of a new month. This gives them a sense of responsibility," she says.

She says as the children get older, the amount should be raised as well of not more than 10 per cent a year.

Haslinda Hj Luqman, a 35-year-old mum who runs a home-based food and bakery business, believes setting the amount based on what she expects her children to do with their allowance is much more effective as opposed to determining the amount according to their age or following what other parents do on how much they give their kids.

"As parents, we should also help decide for our children how their allowance is utilised," she says.

Haslinda's 14-year-old son gets $100 a month. Her son uses the money to pay for food during recess in school, whereas the rest would be spent on things such as eating out, fashion accessories or movie tickets.

She says she would be by his side when he's making spending decisions, to guide him and to see whether any of his purchases is worth it or unnecessary. "As they grow up, they will have to take on more responsibility for their spending habits as their allowance is increased, so it's crucial for us to monitor their spendings to guide them towards smart spending," she adds.

The savings drill

You can't save money if you don't have money to begin with. The allowance system is also ideal to drill the savings habit on children.

Haslinda says the best thing about the allowance system is that it enables her son to see very clearly that when he delays gratification, he could save enough to afford pricier items such as sports gear and video games.

"Sometimes, we reward them the things they want based on their school performances, but it's also rewarding to give them that sense of independence as they learn to save their money for a certain period of time and allow them to experience the thrill of getting that slightly expensive item from their own efforts," she says.

She says her son has also learned to spend more prudently in the process.

"This is good practice. They will get the hang of it and as they get older, they know from their own experiences that saving is a better way to go than loaning in the long run," she adds.