One of the things that we wish for our children is for them to be as responsible (or more responsible) with money as we are. Giving your kiddo an allowance is a great teaching opportunity, and can ease the pain point of them asking for new and different toys. No amount of allowance is too small to start teaching financial literacy. When you give your child their allowance, this is a great time to talk about principles of saving, spending, and giving. I know some families that have their child keep separate envelopes for each purpose.
I strongly recommend that once you give your kiddo the money, you honor their choice of how to spend it. All of their choices, including poor choices and choices that provide only short term gratification are opportunities to learn lessons about needs versus wants and short term vs long term payoffs.
I also strongly suggest that you not tie allowance to household chores. As important as it is to learn about honest pay for honest work, it's equally important to learn that some things are done just because you are part of a household without the expectation of reward.