You blinked and suddenly your baby is a big first grader. She’s got pals she jumps rope with in the schoolyard, computer classes and even a little math homework. But along with these milestones comes another: She wants an allowance—you know, because “all my friends get one.”

Should you give a 6-year-old cash? How much? How often? And the big question: Should it be tied to chores or grades? Though money is a tough topic today, there can be a real benefit to giving an allowance to little kids. “A properly structured allowance—for spending, saving and charity—is an opportunity to learn about money in a concrete way,” says psychotherapist Eileen Gallo, PhD, coauthor with husband Jon Gallo of The Financially Intelligent Parent: 8 Steps to Raising Successful, Generous, Responsible Children.

If you choose to give an allowance, Dr. Gallo recommends offering it as soon as your child starts asking what things cost. How much to give can be based on what you regularly spend on your grade schooler for small items: glitter pens, fruit snacks and so on. Another time-tested option: 50 cents per year in age per week ($3 for a 6-year-old). The goal is to allow her to spend the money as she likes so she can learn basic finance. If she blows it all on doll clothes on Monday, she’ll realize there’s no cash left for the rest of the week to spend on stickers. “Kids are going to make mistakes with an allowance, and you might not like some things your child buys with it,” says Dr. Gallo. “But the mistakes are wonderful because they help kids gain an understanding of and a comfortable relationship with money.” As for pay for chores or good grades, some experts say yes, allowance should be contingent upon some type of work. Others, including Dr. Gallo, suggest that the incentive should be intrinsic:

Doing chores contributes to the family’s welfare, and getting good grades is part of personal motivation and self-worth. “These accomplishments deserve rewards, but words of praise rather than money,” says Dr. Gallo. Still, some working moms might agree that certain efforts for some sort of pay fuels a work ethic and perhaps even an entrepreneurial spirit. So tying allowance to chores remains an individual choice.

The decisions around giving and shaping an allowance require thought based on your family’s values. Still, kids need to learn how money works and what it’s worth. Setting the table, $2? Acing math, $5? Having a healthy relationship with money, priceless!

Smart Spending

Your child can learn about money—specifically, how advertising affects our spending—at You Are Here (ftc.gov/youarehere), the Federal Trade Commission’s interactive website. Then ask:

Why does an ad make you want stuff? Discuss claims and whether or not exaggeration makes a product seem better than it is.

Is It really a bargaIn? Talk about pricing and competition between manufacturers, and why you have to “read the fine print” about so-called deals.

How did that ad make you feel Figure out how some ads push our buttons, and discuss thinking before buying.