When I was young my mom gave us money for doing chores, but my personality was that I would rather not do the chores and not get the money, so that didn't work too well. When it came time to think about allowance for my kids, I read all the views about everything, and liked these articles best (from Crown Financial):
http://crown.org/Library/ViewArticle.aspx?ArticleId=404
and this article in two parts...
http://crown.org/Library/ViewArticle.aspx?ArticleId=342
http://crown.org/Library/ViewArticle.aspx?ArticleId=343
We started giving our kids allowance when they were 4 and 6 (they are 7 and 8 now). Here's the method that has worked extremely well for us so far... They get the amount of their age twice a month, and it gets divided up into "banks"--10% for giving (we give to our church), 50% for savings (they have to wait until they have saved at least $10 to spend their savings bank), 40% for their spending wallet (which they can use pretty much however they want). I'm sure our allowance method will change as the kids get older and their needs change...
So my 8-year-old currently gets $8 twice a month (we used to do half their age weekly, and just recently switched, it's still basically the same amount, just more$ less often instead of less$ more often)--80 cents to his giving (tithe) bank, $4 to his savings bank, and $3.20 goes in his wallet. The $3.20 doesn't sould like much, but it's just enough for him to get something small, or he could save it and get something bigger the next week. The idea is for the amount to be enough for something small, but too much, so they are encouraged to save.
ANY toy that they want, they save for. I don't buy it unless it's for their birthday or Christmas or some super special occasion. So thank heavens! there is no more whining in the store! All I have to do is ask how much they need to save to get it, and they look at the price. At first they would buy anything just to buy something, the money burning a hole in their pocket. But recently they have become more particular about what they REALLY want to spend money on since it is their money.
From my own experience, we decided not to tie the allowance to chores. We require our children to do their part around the house because they are part of the family and we all work together as a team. They can earn extra money for some specific big jobs, though.
Instead, we've told them that their allowance is our way of teaching them how to make good decisions with money so that when they grow up they will be smart with their money. We talk often about how mom and dad have to make decisions like buying food instead of a new fancy gadget, and we are somewhat open about bills so they are aware that we have to prioritize where the money goes.
However you decide to go, I think the important thing is to be very clear with yourself and your children exactly what purpose the allowance has and what you expect them to do with it (or for it). Good luck with it all!