I have 5 kids, and rarely get child support so allowance is non-existant in my house. I try to teach my kids they should equally help out around the house since we all live here as a family. Of course, they are normal kids and don't always do it-so then I have to offer consequences like having their game or phone taken a way for that day if they don't do something I ask. Cleaning their own rooms, picking up their own laundry and dishes is all expected of them, not to be rewarded. Now, if they want something I have them earn it through extra chores like washing the car, cleaning the garage, doing the lawnwork, etc. You're kids are young, and if your doing allowance, then $5 seems just right, and as far as what they do with it-it's their money just teach them they have options. I have been considering rewarding monetarily for grades. I have one daughter who makes straight A's on every report card, and we are trying to find a way to make sure she is rewarded for it. We are throwing around monetary rewards, or maybe going out to a restraunt of their choice without the other kids after each grading period if they make honor roll to keep up their drive for good grades. Kids are always asking for something though. That doesn't mean they get it. I mean my kids can find something to beg for at Home Depot. Some of them are worse at begging than the others, but I know it's coming so I try to not even take them with me shopping unless I know I'm going to let them pick something out! My kids have video games, and the older one's cell phones and an ipod. But, they were Christmas or Birthday gifts, and their dad pays their cell phone bill otherwise they wouldn't have one without earning the money. Just teach them at their young age they have to work for what they want and earn it, they will also learn to save up for things they want as well if you just explain to them something they really want costs $15 and they make $5 a week, so save for 3 weeks and you'll drive then to purchase it. My 6 year old already asks me if there are things he can do to earn money for things he wants, I give him age appropriate jobs so he learns he's earning it. But, it's simply things like dusting for $1, cleaning the glass door inside and out $1. He's atleast learning to earn the money.