1. What amount of money is age appropriate for my child? Be realistic in considering what is reasonable for your child to be spending on a daily, weekly, or monthly basis. Many parents over estimate how much money is reasonable for a middle school child or young high school student and then are later surprised to find that their child is involved in drugs. Kids are trying desperately to fit in at this stage and having excess cash on hand is not going to attract the kind of friends that you really want for your child. Some parents find it helpful to set up a savings account for the child and let the child earn larger amounts of money but only have a small amount of cash available at any given time except in special circumstances (such as a trip to an amusement park).
2. Is the allowance a gift or something that is earned? Some parents start out just giving money to the child and then later refuse to give the child the money because they are angry about chores not being completed or bad behavior. This creates resentment and distrust between parent and child. If there are terms to receiving the allowance those terms need to be discussed with the child in advance of any adverse situations. It often helps to write out the rules/terms so that you can point to the terms later and say "I'm just following the terms we agreed to, I'm not the bad guy here."
3. Assuming that the allowance is earned, consider pro-rating options. Our brains are not finished developing until we are in our mid-20s. We learn through repetition and novelty - so when you have to remind your child to do chores, it is not necessarily bad behavior on their part. Time management and maintaining focus is particularly difficult for some children and may require a higher level of involvement from the parent. In addition, some children do not master skills as easily as others - so it might be useful to give partial credit - or perhaps to have an unmastered skill as a potential for a bonus (can be money or something else special) instead of including it in the basic allowance earning tasks.
4. Help your child be successful. If behavior is going to be tied to the allowance, make that clear up front and make sure you have a list of desirable behaviors and the frequency of each. Make it reasonable. If your child is having behavior problems every day at school and you are requiring perfect behavior every day in order to earn the weekly allowance you are setting your child up for failure. Children are not perfect, allow a little leeway in your planning.
5. Be consistent. If allowance is being earned and you set up the expectations but then still give the allowance, you are inadvertently teaching your child to have an entitlement mentality. If your child has known for weeks about an event and then comes to you the day before wanting extra money for that event and you give it to them without discussion, then you have cheated them out of the opportunity to learn the benefit of saving their money. Sometimes the best thing you can do is let your child experience the natural consequences of failing to plan ahead.
6. Be fair. If you are experiencing financial difficulties in your family and need to adjust the allowance, sit down and explain that to your child. If you agree to lower the allowance, then make sure that's one of the first things you pull out of your paycheck. Don't promise something that you cannot fulfill. If you really cannot afford to give your child any allowance, be honest about it, but keep in mind that if you cut their allowance and they don't see you cutting back on your little perks (think Starbucks) they are bound to be resentful in the future.
If allowance is sounding like quicksand, consider a different approach.
My favorite tool is Howard Glasser's Nurtured Heart Parenting approach. He wrote a book titled "Transforming the Difficult Child" which includes a whole attitudinal approach to parenting, not just a punishment/reward approach. It includes a point system which can include the option of the child spending points for money, but the parent sets the maximum amount of money available per week or per month or whatever time frame they choose. The premise is that anything beyond basic care is a privilege and thus can be earned by the child. In the working world our level of work determines how we get paid and potential promotion opportunities. In the same way, a child can be celebrated in the areas in which they excel but can also be encouraged by getting prorated points for skills that they are still developing. The thing I really like about "Nurtured Heart" is that it focuses on creating a strong and cooperative relationship between the parent and child and thus helps defuse those potential obstacles such as tantrums and greedy behavior. This approach also teaches a balance of saving and spending by encouraging parents to have 'high ticket' privileges require the child to save their earned points. It also allows the parents to adjust the earned privileges to whatever motivates the child and takes the focus off of money.