Money Milestones for Kids: An Age-by-Age Guide

Whether or not your child's idea of a fun toy is a cash register and fake coins, the fact remains that as a parent, it's your job to talk about financial responsibility with your kid.

But how young is too young to talk about budgeting or, say, credit reports? After all, we don't want them to grow up and start hiding money under their futons.

We tapped Erica Sandberg, national personal finance expert and author of Expecting Money: The Essential Financial Plan for New and Growing Families, to help us lay out money milestones for every age.

"It's important to remember that every child grows and matures at a different rate," Sandberg says. "But if you stick with this general guideline, you'll be off to a great start -- and you won't miss any important topics."

Learn to Manage Your Finances in 10 Days

Age 3: Practice Waiting

At this age, kids should be learning about patience, and how to respond when they don't get something they want right away. The simple lesson of delayed gratification will benefit them for the rest of their lives.

Activity: Tell your toddler that you'll give him a cookie now if he wants it, but you'll give him two cookies if he waits an extra ten minutes. See what he chooses and try to encourage him to wait for the extra cookie.

Lesson Learned: Be patient and wait for a bigger payoff, rather than always going for instant gratification.

Age 4: Go Over Counting

Your kid won't understand the finances behind money at this age, but he should be good at counting and basic addition. So, this is the year to start linking those budding math skills to the concept of money.

Activity: Give your child a mix of coins and have her start by counting how many there are. Each week, introduce a new coin with its name ("this is called a quarter") and have her practice picking it out of a pile. Once she's learned all of the coin names, have her separate the pile into all of the different types, and keep growing the pile each week to escalate the challenge.

Lesson Learned: The names and sizes of each coin (plus math practice).

Age 5: Associate "No" With Spending

Kindergarten is when peer pressure starts to rear its ugly head, so stop the peer-inspired begging for stuff ("but Tommy has one!") before it even starts.

Activity: Tell your kid that you can't buy everything you want, so you have to choose the items that are most important to you. The next time your kid sees two things he wants at the store, make him choose just one. It can be just as hard for moms to say no as it is for kids to hear it.

Lesson Learned: It costs money to buy things, so you can't always get everything you want.

Age 6: Start Giving Allowance

This is the year of "make it work." Many experts advise starting kids with an allowance around age six, which means that if they want something just for fun, it's up to them to save and figure out how they'll get it.

Activity: Start giving your child an allowance on a weekly basis. The exact amount will vary depending on your situation and personal history, but a rule of thumb is a dollar per year of age, so you might want to start your kid with about $6 a week. Note that some experts say allowance shouldn't be tied to chores: It's a tool to teach your kid about managing money, not to pay her for household duties she should be doing anyway. Get answers to any other allowance questions you might have at LearnVest.com (see Resources below).

Lesson Learned: If you want something, figure out how much it will cost and save up.

More LearnVest.com Resources:

Answers to Your Every Allowance Question

Age 7: "What Do You Want to Be When You Grow Up?"

This is about the age when teachers start to ask kids what they want to be when they grow up. That makes this a good time to talk to your child about career and work. You should cover the fact that, though you go to work to earn money, if you're lucky, you also enjoy it. Try to instill positive feelings toward work and earning an income.

Activity: Ask your kid what he wants to be someday, and have him draw a picture representing his dream job. Do this activity with him, sketching out a picture of you and your job (it doesn't need to be artistic). Explain what you do at work, why you chose that field and why you like it.

Lesson Learned: People work to make money, but they should try to choose their jobs based on what they enjoy.

Age 8: Show What Household Things Cost

By this age, your kid's understanding of addition and subtraction should be advanced enough that she can easily understand the broad concept of money coming in and going out. So, this is a good age to explain that, although you make money at work, you have to spend some of it on bills.

Activity: From now on, let your child sit next to you while you pay the bills. These numbers -- especially rent or mortgage -- will be too big for her to thoroughly comprehend, but you can let her help you with some of the math operations to balance your checkbook, like adding up the cents column in your transaction ledger.

Lesson Learned: Adults have to pay bills, but that's not a problem as long as they save up money from their paychecks.

Age 9: Open a Savings Account

By age 9, kids are old enough (and self-possessed enough) to understand the concept of saving money for items they need and want. This is the right age not only to set up a savings account but also to include your kid in the action so he feels ownership over it.

Activity: Open a custodial savings account with about $30 (see Resources below), and tell him you've done so. Don't let him withdraw money at will -- if he wants to save up for a big purchase like a bike, he should talk to you about it -- but tell him that you'll take him to the bank to make deposits whenever he wants. For every dollar he contributes, consider offering to match it. For more tips to get your kid interested in saving, visit LearnVest.com (see Resources below).

Lesson Learned: It's fun to save money!

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Age 10: Teach the Truth About Cards

By the time your kid is in late elementary school, she'll almost certainly hear people mention credit cards. Before she takes in misinformation or bad habits from her peers, teach her constructive (and correct) information about the different kinds of cards and accounts people have.

Activity: Take all of your cards out of your wallet and go over which one is for debit, which is for credit, etc. Explain the differences between them. Then, when you're at the grocery store, let her swipe your card for you. Point out what that means for your money: If it's a debit card, she's deducting money from your checking account. If it's a credit card, you might want to say something like, "Swiping this equals borrowing money from the company that gave it to me -- if I don't pay it back on time, they'll charge me extra, but I always pay it back on time!"

Lesson Learned: How debit and credit cards work, and the importance of always paying back credit cards in full and on time.

Age 11: Immunize Against Advertising

Middle school is an era that's all about fitting in. At this age, kids are getting a ton of messages from all over the place, all about how they should do or buy certain things to be "cool." Take this time to bring your kid back to earth.

Activity: Go through a magazine together and point out how many different ads there are for different brands. Take guesses at how much those advertisers paid for those ads, and explain that they're trying to manipulate the emotions of consumers to get them to buy more. Even things that are trendy are often cool because advertisers paid to make them seem cool. Do the same thing whenever you watch TV.

Lesson Learned: Don't fall for the brand-name trap.

Age 12: Demonstrate Wise Purchases

As children start to reach puberty, they should start preparing to make their own wise purchasing decisions. Plus, within a few years they'll start settling into more adult sizes, so they should start discerning when to go cheap and when to buy quality items -- and how to identify that quality.

Activity: Take your kid shopping. At the store, point out a cheaply-made object and a higher quality alternative. Explain how you tell the difference (the feel of fabric and cut; reputable brands, etc.) and when you choose the cheapest option or higher quality item. If you feel strongly about buying sustainable or eco-conscious products, explain what that means, how to identify those labels and why you're willing to sometimes spend more on them. (See Resources below to read a guide to conscious consumerism.)

Lesson Learned: Price isn't always the determining factor in buying decisions -- the key is to choose smart purchases rather than just the nicest or the cheapest.

More LearnVest.com Resources:

Shop for Good: Your Guide to Conscious Consumerism

Age 13: Interact With the Stock Market

By now your kid will recognize these words when she hears them, either on the news or at school. Too many adults feel a total lack of confidence around money, so get your child in the habit of asking for clarification on financial concepts she doesn't understand rather than simply nodding along. Start by making this hard topic accessible.

Activity: Tell your kid, "I invest my money in the stock market to help it grow; in the short term, there's the risk of losing money, but over the long-term it's one of the best ways to make the most of my money." Show her a historical graph of the S&P 500 (you don't have to tell her that name -- you can just call it "the market" for now) so she can see that, although the numbers sometimes dip, they tend to rise over time. If you want more guidance on these topics yourself, check out the LearnVest.com weekly newsletter, The Market by LearnVest (see Resources below).

Lesson Learned: How the stock market works, what it is and why people invest in it.

More LearnVest.com Resources:

Get the Free, Weekly LearnVest.com Newsletter: The Market

Age 14: Make Your Kid Work

At this age, young teens start going out with their friends and spending money more independently than before. Allowance might no longer cover everything your kid wants, so, if that's the case, make him work for it.

Activity: Whether it's by babysitting or mowing neighbors' lawns, let your kid feel his own power to make money and the freedom that comes from making his own spending decisions with that money. Emphasize the point with specific examples of how everything you buy can be measured with time. For example, if your teen wants a $120 sweater, explain that he'd have to babysit for 12 hours at $10 per hour to afford it.

Lesson Learned: You have to work in order to get what you want... but if you do make money, you have a lot more options.

Age 15: Open a Checking Account

Open up a checking account for your kid as early as you beileve she'll be able to handle it. If she's responsible by nature, now's a good time to open an account where she can store her money and write checks. Do not add money to this account for her. She should seed this account from her savings or money from her after school job.

Activity: For her to have an account in her name, you'll need to be a cosigner. You may need to sit down with a bank official to explain that you'd like to teach your kid financial independence as early as possible. Although you're a cosigner, let her know that she'll suffer her own consequences if she overspends from this account. Have her write checks for costs like her student activity fees, and sit down with her monthly to balance her checkbook.

Lesson Learned: How to keep an eye on the bigger financial picture -- and how to manage a checking account.

Age 16: Finding Balance

Junior year of high school is a pivotal time. Teens tend to be incredibly busy: sports, extracurricular activities, community service projects, AP classes. This is a good time for them to learn how not to lose their heads. After all, adults can also be overwhelmed by trying to balance work, outside projects and a personal life. And finances are often one of the first things to be pushed aside when you're under stress.

Activity: If you suspect your teen is becoming overwhelmed, set aside an afternoon to find a solution. Make some hot chocolate, bake some cookies and go over his activity schedule together. Figure out whether he can shift around any obligations, and whether his schedule is unhealthily busy. Talk about how he handles stress, and what he does to relax.

Lesson Learned: Everyone has limits, and you can push only so far. Money is great, but it's worthless if you're not leading a balanced life.

Age 17: Explain Credit Reports

Your teen may be getting ready to go to college, but even if she isn't, she'll need to understand the ideas behind credit. Go over this with her now, before the bad habits of her peers get ingrained in her.

Activity: Look up her credit report and score with her online (even if she doesn't have any credit yet, it's a good exercise to show her the steps involved -- if that's the case, you can just look up your own score). For a step-by-step checklist on how to do that, go to LearnVest.com (see Resources below). Ensure she understands the importance of keeping her credit score high by paying off every bill in full and on time. She'll need to develop good credit to eventually get loans for things she wants, like a house or a car, and it takes many years to develop a good track record.

Lesson Learned: How to check your credit report and score, and why they're important.

More LearnVest.com Resources:

Check My Credit Report and Score

Age 18: Decide on Student or General Loans

Before your teen heads off to college or into the working world, he needs to fully understand how loans work -- he's borrowing money to use now, but he'll be paying interest on that money even while he pays it back. You've already covered credit reports; follow up that lesson with the importance of always paying account minimums, and, whenever possible, even more than that.

Activity: Sit down together to go over student loans (see Resources below). Talk about whether your young adult will be taking on this financial burden, and whether you'll be helping. Both of you should understand the terms of any and all loans before signing them. For example, verify that he doesn't accept any student loans that start charging interest while he's still in college. Together, come up with a solid plan for saving money while in college and repaying those loans afterward. You can find more info on student loans from www.finaid.org/loans.

Lesson Learned: Student loans can be a huge burden, and the worst thing to do would be to bomb your credit score in the process. Before entering into a loan agreement, make sure you understand all of the ins and outs, and that you're choosing the best loans for your needs.

Originally published on LearnVest.com; republished with permission.

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