Our rules: he has a 3 in one bank, and he puts 10% to tithes, 10% to savings, and 80% he can do what he wants with. We teach him the importance of tithing and charity in our lifestyle as well as instruction, because it is very important to our belief system. Not only do we teach savings (he actually voluntarily puts more into savings than the 10% on occasion), but we also teach math with it. Our son turned 5 in October and has learned very basic math for the "goal" of getting his own bank account. He doesn't have his tables memorized, but he can use his beads to come up with the right numbers when we're adding/subtracting. We save for 3 months and once a quarter we'll take him into the bank to deposit what he's saved up. He's thrilled with that. Where does he get his money? From his "job". He does his chores and helps out and earns his allowance (he also knows that it's being part of the family, so it will get done regardless, but if he does it right, and without a "fight", then he's done a job well done and will get paid.....if he pushes the issue, it's just a chore and will get done without reward, and it's his choice on how that works out). Sometimes he does extra little jobs (help pick up leaves we rake or branches when we trim the shrubs, or help wash the windows, etc) and gets extra money for that. Sometimes he just made extra effort and was awesome, and I'll put 2 stars on the calendar for that day (1 star means he's earned his allowance for that day, which is paid up on "pay day"---Saturday evening; no star means no money that day, 2 stars helps me remember that he did something special and I'll add whatever I think is right for that incident: could be 10 cents, could be a few dollars).
For spending: he'd been just putting his money away for awhile and didn't really have an opportunity (at 3 years old) to buy anything. But then one day, nowhere near a holiday, our community was having a special fishing day. We thought he was old enough to try his hand at fishing with daddy, so we signed up for it. He'd picked out a Spiderman fishing pole so we counted his money and had him help with some extra chores to get "bonus pay" on top of his regular allowance. We went to the store to buy it together (he got the pole, I got the tackle box and accessories), and he gave the lady his ziploc bag full of quarters (he was getting paid a quarter a day). I let her know he'd worked for this pole and she bragged on him, and behind his back I slipped her my card and put the bag of change in my purse for later use on more "paydays". We made a big deal out of his first fishing day, and even though he didn't want to fish for very long, it was super sweet. But one thing he wanted when we went to get the fishing pole: a Toy Story slumber party set (bag, sleeping bag, compass, flashlight). I said "Ok, you are going to the fishing day with your daddy, so don't you think you should get the fishing pole to fish, and save your money again for the sleeping bag? If you want the fishing pole now, we can work hard and come back for the sleeping bag later". And we did. Days before his first sleepover.
Then another day I took him to the Stockyards to roam around, ride the mechanical bull, watch the train and cattle drive, etc....and then we went into the shops to let him get a souvenier with his own money. He wanted tons of stuff, and I wasn't going to tell him what to buy, but helped guide him because that's what teaching does. I said "Ok, you have $10 to spend. I see that you like tons of stuff, but it needs to be smaller than 10 on the sticker". Then I showed him that he could like several things, but let's pick what is his one FAVORITE of the things he liked? (Sling shot, ball, toy gun, fake coonskin cap, toy horse). He thought a bit and said "This is my favorite" and picked his horse. I told him it was a fine looking horse and would look great with his cowboy stuff. He is STILL very proud of that horse, 2 years later.
But for frivolous spending: one day he asked me for chicken as we were passing Chicken Express and I thought what the heck, my husband was out of town, why cook? So I pulled in and ordered. And as we were at the window, he saw Sonic and decided he wanted a grilled cheese. I don't like buying grilled cheese when they're so easy to do at home, and besides, we'd already ordered. He insisted he wanted the sandwich and I said "Son, you ASKED for chicken and we've already ordered it. We are here because you said so, and now they are cooking it already". He didn't care, he wanted the sandwich. So I said "Ok. Fine. Here's the deal: if you go with THE FAMILY you will not have to pay, it's a family thing. If you eat with THE FAMILY, I will take care of it, and you don't have to pay. If you choose to go away from THE FAMILY and do something DIFFERENT, that is ok, but you must pay for it". He was fine with that so we went to Sonic. I said "Ok, after tax, this is going to be 5 DAYS of work to pay for this sandwich. Do you think that this sandwich is worth 5 quarters, or 5 days of work, or do you want what the family has, for no money?" He insisted on the sandwich so I ordered it and brought it all home. I fixed everyone's plates (leaving his chicken portion for lunch the next day) and put it in front of him but said "Wait! Don't touch it yet!" and got his bank. I let him count out 5 quarters to give me, and then said "Great. Let's eat!" He could hardly choke down that sandwich after having to give me 5 quarters. He doesn't do that anymore. It's been well over a year, but that hasn't happened again. Sometimes he sees something in line and will say "can I have __" and I will say "I see it. I'll keep that in mind" (sometimes---and that means he may well get it for a future reward or gift). But other times I say "If it's so important, would you like to use your money?" NO! NO---I'm just looking. That's what he says 99% of the time. And if he does want something enough to use his money, then by all means he can!
For an 8 year old: if he wants to go to a movie or the skating rink, he could pay for that. Or if he saw something that he thought was awesome and wanted to work towards (or buy if he already has the money). Little stuff like the ice cream truck or money for a soda or nachos or whatever if he and his friends attend a game. When I was in 4th grade Guess jeans were the thing. Mom told me "I will buy your clothes: Levis are reasonable at $20, but if you want $75 Guess, then you'll come up with the extra". I'd use $55 from Christmas, birthday, allowance, or babysitting money to buy name brand jeans, and she'd give me the $20 she was going to spend. If you go to a fair and he "needs" cotton candy, pretzels, or to bungee jump, that kind of stuff, you could let him spend his own money if you choose to. I like to do family outings that I pay for, but if they were older and wanted to do more than I had budgeted, that's when their money comes into play. But no, I don't really believe in MAKING opportunities to spend the money, as those opportunities really will come up on their own here and there. I think that doing that will create that mentality where they feel the money is "burning a hole in their pocket" and because they have it, they need to spend it. And that's not what you want to teach them. Better to just let it sit in their bank and grow, and when things come up, the money is there. That's my long long opinion. Hope it's helpful.
