I subscribe to the Dave Ramsey Financial Peace University principles. First, we call it a commission rather than an allowance. That way the kids know they have to "earn" it rather than just receive it. Then, there are certain things my kids have to do as part of a contribution to the household. For example, they are required to keep their things (we call them "tracks" - toys, books, clothes, etc.) picked up in the common areas. The philosophy is we all have to live in this space and we all have to respect one another by not making others have to step over it or pick it up for them. We also require them to clear their own dishes from the table and put them in the dishwasher, do their homework, and practice piano. These are non-negotiables and are expected of them as a member of our family. But they then can earn commission for other chores, such as feeding pets, cleaning their rooms, making their beds, etc. Their room, for example, is their space. While I'd prefer them to keep it clean, they can choose not to. A commission motivates them to keep it the way I want it. If they don't keep their room clean, then they would lose their commission for the week.
The societal guidelines are to give children $1 for each year they are old. For example, a 3yo would receive $3 a week. I have a 10yo and $40 a month is a little rich in my opinion. So, I pay $1 a week per chore and each child has 5 chores, hence $5 a week. I've given my 10yo the option to add 2 more chores to his chart and earn $7 a week, but he hasn't taken me up on that.
I also implement penalties for failing to keep "tracks" up or clearing dishes, the jobs that are expected of them. The penalties are $0.25.
The money my kids earn then must be divided into "GIVE", "SAVE", and "SPEND" envelopes.
This program can be easily used for a child as young as 3yo. Good luck as you decide what works for you!