Kids do respond best to authentic experiences and handling their own money certainly is a valuable learning experience. I do this already with a reward chart for positive behaviors where my 3 yr old can turn in "stars" for a special treat like extra cuddles, special dessert choice, etc. There are many extrinsic & tangible rewards that can be supplied (extra cuddles, play date, mommy or daddy time, choice time for family outing, etc) in addition to money, whether it is a quarter or a dollar. Using an allowance as a tool for teaching fiscal responsibility is a fabulous idea. Personally, I don't think a child, age 5, needs to collect large sums of money to begin to feel they have earned respect or independence. However, you need to consider your own values and the individual qualities of your child in putting such a program together. Keep in mind that you are trying to teach your child to make good choices, which isn't the same thing as a free choice.
Here is an idea that a friend told me she has done with her 8 yr and older children:
Sit down and create a budget outlining things that the child would like to use money for. Break down line by line to include birthday party gifts, field trips, special purchases, activities (dance, sport, etc) - you get the idea. Then the parents would review and approve the budget, and remove costs that they do not approve (with explanation).
The child then describes what will be done in exchange. For example, if she does the following to earn her weekly allowance: clear the table, water the plants, feed the pets, make her bed, etc. Extra spending money on a vacation was not planned directly into this budget - however, the parents gave a set amount at the beginning for the children to manage for the entire trip.
Hope this helps. Good luck!