10 Financial Milestones for Kids of All Ages
When it comes to teaching kids about money, it can be hard to know where to start. Knowing the right time to introduce key concepts can help them retain the information and form the building blocks of understanding personal finances. Here’s a breakdown of key financial milestones for kids and when to start talking about them — from pre-school to high school.
Learning to Wait — Anyone who has ever been around toddlers knows patience doesn’t come naturally to them. Teaching pre-school children they don’t get everything they want when they want it is challenging, but worth it. The concept of delayed gratification is one of the building blocks of understanding what it means to save money.
To make it more fun, try a variation of the well-known Stanford Marshmallow Experiment. Offer your child a cookie (or other treat). Let them know they can have one right now, but if they wait another 10-15 minutes, they can have two. It’s a challenging exercise that helps teach kids how good things come to those who wait.
Counting Coins and Cash — With so much of our financial lives conducted online, it’s important to familiarize kids with actual paper money and coins. Have them learn the names of each type of coin and the denominations of bills. Explain how money is used to buy things we want and need, and how it’s often deposited into a bank for safe-keeping.
Working for a Living — Start talking about what it means to go to work and choose a career. Explain how working is what we do to earn the money we need to live. Try to convey positive feelings about the benefits of work and ask your child what they want to be when they grow up. Though the answer will change countless times over the years, it will start them down the path of discovering career options.
Saving, Spending and Sharing — Whether your child starts earning money from doing chores, receiving cash gifts, or getting an allowance, it’s time to help them start managing it. Have them decorate and label three containers (jars, boxes, Pringles cans etc) designated for saving, spending and sharing. Each time they receive money, have them divide it into the three containers in whatever amounts they think is appropriate. Discuss the reasoning behind their choices and make suggestions to encourage saving.
Understanding Advertising — The American Psychological Association estimates that kids see upwards of 40,000 ads per year — that’s more than 100 per day! And they are especially vulnerable to the recent phenomenon of social media “influencer” advertising; because it’s delivered directly from peers they feel a personal connection with.
Talk with your children about how the sole purpose of advertising is to get them to part with their money. Also explain how influencers are paid to talk up products, even when it seems natural and unscripted. Help your kids make good purchasing decisions based on what they truly want or need, rather than what they see in a viral ad.
Comparing Prices — Turn shopping for household essentials into teachable moments by having your kids help you comparison shop. When you go grocery shopping, give kids a list and have them compare the prices on selected items. Talk about why prices differ (marketing costs, product quality, brand name recognition) and let them choose what they think is the best value. See if your choices align with theirs and talk about why you agree or disagree with what they choose.
Introducing Credit vs Debit — By this time, your children have seen you use your credit and debit cards thousands of times. Explain the differences between credit cards and debit cards and appropriate uses of each. Talk about how overusing credit cards is a way many people get into debt they can’t afford to pay back.
Encouraging Entrepreneurship — At this age, many kids are highly motivated to make money but too young for after-school jobs. But that doesn’t mean they can’t make their own money. If your child expresses an interest in earning, encourage them to start their own small business. These ideas are a great place to start.
Introducing Interest — It’s time to emphasize that borrowing money always comes at a price. Whether it’s a car loan, student loans, mortgage or credit cards, explain to your teen how “buy now, pay later” actually means pay more later because of interest.
Getting Schooled — Is college in your teen’s future? Start talking about college in your teen’s freshman year of high school so there’s a concrete plan in place by the time they graduate. Determine if they’ll be attending community college or university, in-state or out-of-state, and how the family plans to pay for it. They’ll want to start saving their own money, too.