Restricting Apple ID purchases to free stuff only
What I would do is create an Apple ID for her without a credit card, along with creating an Apple ID for yourself (hooked to a credit card).

Without a credit card, the only way to purchase something would be for her to:


Have a gift card (you still couldn't control that spending)
If she wants to buy something, she needs to come to you directly. You can go into iTunes (on your computer with your Apple ID with the credit card), find it in the store, and gift it to her:


  


She'll get an email that'll allow her to download the item.


If you want a less restrictive method, you can set up an allowance (look at bottom of page) that would allow her to spend a set amount of money every month.