Should kids be allowed to spend gift money (from birthdays,holidays, etc.) on anything
In my household, yes, with the caveat that it be an age-appropriate, legal, reasonable purchase.
"I don’t mind a banshee, that’s fine. 2 banshees? I HATE you. I actually wish bad things upon you." -- Day Daily #459 P1
unlike a giftcard, we always told our kids a portion of gift money goes in the bank and the rest can be spent.
It depends on what they are getting the money for. For birthdays, they don't get much money so they can spend it on anything they want (in reason of course). For religious events, they have to save some.
We allow the kids to spend any money they have on whatever they'd like, as long as it is age appropriate.