It can be hard for parents to judge the fine line between protecting their kids and stifling their initiative.

When kids earn money, they feel a sense of empowerment. However, if they can't spend that money as they choose, it can start to seem as though they may as well not have made the effort to earn it in the first place.

There are some genuine causes for concern, of course, which is what makes the balancing act so fraught. Kids are still kids, their brains are not fully developed, and they can make some very bad decisions at times!

One thing which is guaranteed to generate debate among the parents of our young entrepreneurs at Cash Smart Kids is whether parents should take control of the money their kids are earning.

I suggest that it is a good idea to allow your kids to spend the money they earn themselves on whatever they choose, even if it is something you don't think is a good idea (as long as it's not dangerous).

For example, a friend of mine has raised her son in the Steiner philosophy, and they don't have a television or electronic games. He desperately wanted an X-box, worked hard, and saved up the money. She allowed him to spend the money on the X-box, even though she herself would never have bought one for him.

Likewise, we told our girls we would fund one ear piercing and one only, and if they wanted more piercings (which they did), they would need to pay for them with their own money. So far, they have had other priorities!

Although it can be very, very difficult to do this, it builds a very important sense of self-reliance. The subconscious lessons are:

I don't need anyone else's approval to have what I want

If I master money, I have the power to do anything I want to do

Nobody can stop me from having what I want - I just need to work for it

If nobody will give me what I want, I can go out and make it happen anyway

Earning money gets me respect and independence

If you step in and start to control what you child does with the money they earn, you can undermine this sense of self-reliance, and then you get an alternative set of beliefs:

It doesn't matter how hard I work, I never get what I want

The big people make the rules and there's nothing I can do

I have no choice but to conform

As you can imagine, these beliefs are not as useful in later life as the other set!

It can be difficult when they want to buy something you don't want them to have - for example, a blasphemous T-shirt or a "skirt" that's more like a belt, or a nose piercing. Sometimes, it's appropriate to set an age limit on something, so they have to wait for it, even if they have already accumulated enough money.

Everybody has to make their own call about keeping in place the parental boundaries versus allowing the child to choose how they spend their earnings. I personally use a little "gut test" - if I have a strong sense that something is not appropriate (for example, a piercing is a permanent hole and they may regret it later, so they really shouldn't make that kind of permanent decision before they have the brainpower to think long term) then I will put in place an age limit or suggest a compromise (like stick-on gems).

If it's something that makes me uncomfortable, but I can't really see how it's dangerous - like a very short miniskirt - then I will allow her to buy it but I will probably set boundaries on where she wears it - not to Grandma's, for example, or to a party where there are boys we haven't met.

You need to keep good, firm boundaries in place, because you don't want them starting to think that just because they have money, they don't have to consider the wishes of others any more.

No matter how much money is piling up in their bank account, they still need to take out the garbage when it's their turn, do their homework, and speak politely to their relatives!