The topic of kids and allowances is always a difficult topic. There is no “right” answer. You just need to find a system that works for you. I personally agree with the article below in that we don’t pay kids for chores or grades. They are part of the family and have duties that aren’t compensated just like all of us. However, I do think it is important to for kids to earn/receive money that they can use to spend on things they want. I want my kids to make mistakes with money and learn lessons like spending priorities while the amounts are small and the damage can be contained.
A good article on kids and allowances:
http://news.yahoo.com/s/usnews/20110112/ts_usnews/thesmartwaytopaykidsanallowance