These skills don't fully develop until several years into elementary school, but that doesn't mean you shouldn't begin to talk to children much sooner. Cash gifts usually are occasional. Receiving an allowance teaches basic money management, promotes independence, encourages communication and provides practice in living on a regular income. Allowances can promote a sense of responsibility, teach the value of money, encourage planning and setting goals and allow children to learn from their mistakes. It forces parents to define what expenses belong to the children, and what spending is allowed and prohibited by family values.
Allowances have some disadvantages too.
Parents might have trouble deciding what amount of money a child can manage. The allowance also can become a power issue if they lack a united approach to both handling money and parenting children. If linked with household chores, a child might learn that money is the only incentive to do work. Parents might feel pressured by their children to give an allowance. An allowance doesn't always work well with teens as a way to teach money management skills, especially if it was not started at a younger age.