To heck with the fiscal cliff. The financial debate that won't go away is among parents who just want to know if their kids should work for the allowance they receive. The answer isn't always as easy as it may seem.

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In our world of increasing personal financial responsibility, where the social safety net is crumbling and individuals must learn to cope with complex money choices like how to save for retirement and choose the right mortgage, one of the most vigorously debated and polarizing personal finance questions out there is: Should kids have to work for their allowance?

No kidding. This subject generates more interest than the fiscal cliff; it turns out parents, gurus, academics, and financial advisers like old hippies to a Neil Young concert.

In one corner you have financial radio host Dave Ramsey and all-around money guru Suze Orman, who both counsel parents to tie allowance directly to chores. No workee, no payee. They don’t even like the world “allowance.” Ramsey calls it “a commission” and Orman prefers the term “work pay.” Orman, by the way, has no children. That doesn’t mean she can’t have theories, but child rearing often calls for non-prescriptive solutions. Every kid is different. Ramsey is the father of three. Presumably he’s had a hand in raising the youngsters.

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In another corner you have the godfather of the financial literacy movement, Lewis Mandell, professor emeritus of finance and managerial economics at SUNY Buffalo. Mandell authored the nation’s first prominent financial-literacy scoring system for the JumpStart Coalition for Personal Financial Literacy. He says parents should pay no allowance period—neither as an entitlement nor as a reward for chores.

Parents should simply pay for the things they want their kids to have, in Mandell’s view, which he bases on a study that found kids who received no allowance scored highest on financial literacy tests. That result surprised even him and led to his maverick opinion. Mandell doesn’t have a lot to say about whether allowance is better tied to work or given as an entitlement. Either way, it is helpful as an educational tool only if parents talk with their kids about managing their money.

In a third corner you have those who believe that a base level of allowance should be paid unhinged to chores, but that additional pay to children should be available through odd jobs that go above and beyond what might be considered the responsibility of a good family citizen. You don’t get paid to make your bed or take out the trash. But washing the car and cleaning the gutters might be worth a few extra bucks.

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This third corner is where the more thoughtful parents and pros stand. I put myself there along with folks like Janet Bodnar, personal finance editor at Kiplinger’s; Jean Chatzky, financial editor at the NBC Today Show; and Bill Dwight at family finance website Famzoo.com. The folks I just mentioned have kids and deal with this issue in the real world. We’re not looking for simplistic rules and sound bites, and we understand that there are gray areas in any allowance strategy. You have to be ready to adapt.

As much as I respect Mandell, whom I have interviewed several times, I think his position is off base. I can’t explain why in a study kids who were not paid allowance showed more financial aptitude than those who were paid an allowance. But I know that all the scores were failing and that the test results were similar. The real issue seems to be that parents didn’t talk enough about what the money was for. So the kids didn’t learn anything. That was Mandell’s observation as well. You can’t just say here’s your cash, spend it wisely. Whether kids work for cash or are given it, they don’t know what “wisely” means. The learning is in the discussion and reinforced in their spending decisions.

The basic problem with Ramsey’s view, as I understand it, is that he doesn’t distinguish between working for pay and work that is part of family responsibility. He believes kids only learn the value of money and to appreciate hard work when they must earn what they receive. That’s a fair point. Yet if you pay kids for every little thing they do, as Bodnar has written, they become “little money grubbers who expect to get paid all the time.” And when that happens you have to keep upping the stakes to incent the behavior you want. Orman seems to agree on this point, saying there should be at least a few nonpaying chores.

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But there’s another problem here, too. The whole point of paying an allowance is to teach your child how to budget and live within their means. If they fail to do their chores (gads!) and don’t receive any money how are you going to teach them to manage it? You might argue, well, they will certainly do their chores next week. But that’s not always the case, as I believe most practicing parents understand. Besides, do you really want to keep track? One study found that 89% of parents assign chores but only 29% made sure the chores got done.

Just over 60% of parents pay an allowance, according to a recent survey by the American Institute of CPAs. Most begin by the age of eight and pay an average of $65 a month. The vast majority tie allowance to chores—89% in this survey, which is the highest I’ve seen and may be linked to the popularity of gurus like Orman and Ramsey. Interestingly, parents are more likely to talk with their kids about manners, eating habits, grades, drugs and alcohol, and the risks of smoking than about managing money wisely. So that critical link—the conversation—is missing. As Dwight noted in an email:

“I find the allowance debate to be a diversion. To me, the far more crucial thing is practice–early and often. It’s critical for parents to make sure their kids get regular hands-on experience making real spending, saving, and giving decisions with a modest, constrained supply of their own income. I don’t think the specific source of that income (unconditional allowance, chores, outside jobs, or a hybrid thereof) is hugely important, as long as it’s thoughtful, consistent, clearly communicated, and in line with the family’s values. My bottom-line advice to parents: Don’t let agonizing over the allowance vs. chores debate get in the way of getting your kids started with hands-on money practice. Pick an approach, get started, and tweak it over time.”

I agree with Bill in this respect: The key to making allowance work is clearly spelling out what the money is for and then standing firm when your child blows the whole amount and asks for more. What’s the right amount? That depends entirely on what your child will be asked to pay for. I like covering the basics and asking the kids to budget for discretionary items. Even a spendthrift teen should always have sneakers; just not Air Jordans.