One of the reasons parents give children allowances is to help them learn how to manage money.

But for it to be a truly effective teaching tool, parents need to spell out what the allowance will cover, how it can be spent, the consequences of overspending, and how much should be saved or given to charity.

Here are some guidelines:

1. Encourage planning. When deciding how much the stipend should be, consider giving enough to encourage saving or charitable giving. But be careful not to give too much. If the kids can buy anything they want, the allowance fails to teach them how to prioritize and set goals.