My daughter is only five years old, but I'm already worried she isn't learning money management skills early enough.

We haven't started her on an allowance yet, and every time my wife and I vow to start another "chore sheet" on the side of the refrigerator, we don't always follow through on it and the chores don't get done and our daughter loses interest in whatever gift we've promised for reaching a goal.

I've held off giving her an allowance, figuring she wasn't ready for it yet. But with kindergarten behind her and first grade looming, I think we're getting close to starting it so she can learn some good habits early. I've always been a fan of intrinsic value, and try to teach her that everyone in the family has to do chores, whether paid or not, and that getting good grades is a sign that she's learning and doesn't have to be rewarded with money.

Some experts advise against tying getting chores done with an allowance, saying it punishes them for not doing chores and becomes more of a disciplinary tool than a teaching tool. But at least a few times a week I threaten my daughter with losing some of her toys if she doesn't do a chore or task that needs to get done, such as taking a bath. I'm tempted to avoid the experts' advice and withhold allowance until her chores are done. Adults don't get paid if they don't do their work, I tell her.

Before coming up with another chore list and setting a weekly allowance, I did some research on how to prepare my daughter, and my wife and I, for this jump into personal finance for kids. As I suspected, age five or six is a good time to start introducing a child to an allowance.

The good news is that we've already taught her about money, or at least set up learning opportunities for her without really thinking about it. We started her college fund months after she was born, contribute to it each month. I look forward to the day I can show her the fund statement and explain how it grows and how much of her college it should pay for.

She also has a savings account, which she had fun opening at our bank, with the stipend that half of any money she receives for birthdays and other events from relatives goes into the account and the rest she can spend. Her savings account is for a long-term goal, and she can spend it when she turns 18. My hope is she'll save for a car, but I'll leave that decision up to her. I don't think she's yet figured out what long-term goals are, although she knows what college is since we talk about it often. SmartyPig is a good web site to learn about long-term goal-setting, and is a good start to teaching how compound interest works.

She also has a piggy bank, and learned in kindergarten how to count change. A piggy bank, glass jar or some other way kids can watch their money accumulate is ideal for holding their allowance. Money Savvy Generation sells a see-through plastic piggy bank for $17 that has slots for money to save, spend, donate and invest.

If your kids are more into a virtual world than watching a piggy bank get fatter, ThreeJars is a good start if you don't mind paying $30 a year for a family membership. The child decides how their allowance will be spread among the three jars: spending, savings and charity. Parents keep their money in their regular checking account, then pay their kids online with virtual money that can be redeemed for cash, or a gift card from the website.

A rule of thumb in determining how much allowance a child should get is $1 for every year of age. So a 5-year-old should get $5 per week, which sounds like a lot to me as a parent, but inflation makes it easier to digest. But if your family finances can't support that general rule, then adjust.

Make it clear what the allowance is expected to pay for. Obviously, you'll continue buying your first-grader clothes and won't expect them to use their weekly allowance for shoes. But after putting money in savings and any other accounts you agree upon, the spending should be up to them -- to a point. For the sake of dental bills, for example, don't let them buy nothing but candy with their $5 or $6 each week. Encourage them to save more if they want a specific toy.

As children grow older, they'll expect a larger allowance and parents should expect more of it to be spent on things they'd normally buy for their children, such as clothes. But if that's a requirement, then the allowance should grow to cover those expenses. And as children become teenagers and can legally work outside the home, allowances usually end and kids are responsible for coming up with their own spending money.

That brings me back to tying an allowance to chores. When the allowance ends, as it should, you don't want your teen to think they can stop washing dishes after dinner and picking up their rooms because they aren't getting paid for it.

There are other ways to pay an allowance without requiring chores. One is to give a flat fee, and pay more -- $5 or so -- for dong extra duties such as washing the car or helping with yard work. Another is to have no strings attached to an allowance and require that all chores be done by noon Saturday before they can leave the house and play. I'll let you know if that one works out at my house. I'm likely to do all the chores myself just to get my daughter out of the house.

Aaron Crowe is a freelance journalist in the San Francisco Bay Area.

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