My DD is 5 and gets $5 a week pocket money. Mostly she buys colouring in books, stickers and school-type workbooks from cheapy shops (Reject Shop/ Bargains Plus, etc).
She recently saved some money and bought a new funky helmet for her bicycle
Our 12year old son spends his pocket money mostly on iTunes buying songs, games and items within games. We also make him buy his own credit for his phone.