We've found that using an allowance for kids is actually helping us save a lot of money.  If this sounds funny or contradictory to you, hear me out before you make up your mind.

About a year ago, I realized that my kids don't really have a lot of respect for money. I started thinking about why they were like this and realized that it probably had a lot to do with the fact that they don't understand the value of money. I decided to use allowance to teach it to them.  Here's how...

Figure out how much money you spend on your child in an average month for clothing, entertainment, school lunches, toys, spending, etc.  Now give your child something close to that amount of money for an allowance each month. You can give them the entire amount at the beginning of each month, or you can pay them monthly.  We actually chose to set up a Quickbooks file for our 13-year old and instead of giving her cash, she's required to manage her own "account" and make withdrawal requests, etc.  

Next, explain to your child that their allowance must be used for all the things that need and want, with the exception of birthday and Christmas presents.  They can use their money any way they want, but they have to buy all of their clothes, their school lunches, etc. with their own money.  

When we first started doing this, my daughter immediately used her first month's allowance to buy a new iPod - and then she was broke. The second month, she still  didn't quite get it and she spent her money on a really expensive digital camera.  But when she wanted a new pair of jeans, I simply asked if she had any money. When she ran out of lunch money at school, she had to pack her own lunch until the following month when she was paid again.  

By month three she was starting to spend her money more wisely, and as of today, she's managed to save more than $500 of her money - "just in case something important comes up," she tells me. 

You might still be wondering how this will save you money.  Well, if you are anything like me, your kids come to you every time they need something. You dole out $5 here and $20 there - before you know it, you've spent far more than what you had planned to spend each month on things that came up.  If you make the decision to give your kids a set amount, they have to learn to manage it all themselves and you won't be handing out extra money all the time. 

Using allowance for kids has helped my husband and I to save money, while also helping my daughter to learn the value of a dollar. She used to want only name-brand clothing - now that she buys it all herself, she's a lot more selective about what she buys. She also takes a lot better care of her things because she bought them.