I recently traveled to Maine to visit my family. At my sister’s house, my 6 year old nephew grabbed my hand and told me he wanted to show me something. Depending on the source, that might sound a bit ominous, but with my nephew it’s usually a prelude to me watching him play video games for 20 minutes.
This time he swung me through the living room and into the kitchen. He pointed to a space on the wall above a hanging cluster of winter jackets. “It’s real,” he said, anticipating an unasked question.
There on the wall was a blue picture frame. And inside the frame was a $100 bill.
“He worked really hard to save up for that,” said my sister.
“Worked?” I said. “Isn’t he like…6?”
“Well,” said my sister, “he mostly gathered up loose change. Sometimes he asked for other people’s change.”
My sister sighed. “He’s very proud of it.”
It was an impressive amount of cash for a kid his age, but I was more fascinated by his decision to frame the bill. Clearly the value of the $100 was not in spending it or even saving it – it was simply in having it. And that makes sense, because spending and saving are not really on his radar at the moment. He understands that you need money to buy things, but not that he needs his own money to buy things – that’s what parents are for.
All of this got me thinking about kids and money. Specifically, at what age should children learn certain lessons about money and finances?
Financial education, grade school and parents
There are certain topics you can reasonably expect your child to learn about while in school. But while math, reading, writing, history, and science are usually a given, your child is much less likely to be given much of a formal education on the subject of personal finance.
This puts the pressure on parents to not only serve as money role models, but as active teachers and advisors. As Maura Attardi, a director in the education department here at MMI, told me, parents are always a child’s first and best teacher.
So be proactive with your children, and keep looking for those teachable moments. To help you keep your child’s financial education on track, Maura helped me put together the following loose guideline of important money milestones for kids.
What is money and how does it work?
Little kids see a lot of your daily life. From their perch on your hip or strapped into their car seat, they see you buy groceries, pick up prescriptions, get gas, and make a quick Starbucks run. Bring your children into the loop right from the get-go. Explain what you’re doing and why. It might not make much sense to them at first, but over time – simply by riding shotgun on your everyday transactions – they’ll start to piece it all together and a potentially complicated topic will become second nature.
The basics of shopping: what it costs vs. what you have to spend
Once your kids have hit grade school you should be able to start connecting their growing math skills with your routine shopping experiences. If you’re able to, make some purchases together with cash and let your child count how much money you have to spend, and then have them add together your purchases.
As your child becomes more confident and knowledgeable, you can start introducing concepts like comparison shopping and creating a shopping list.
Age: 5 to 7
“I think this is a tough one,” Maura told me. “I would say 5 or 6 typically. When discussing this with my children, they understand that there are responsibilities that they have to our family and to the community that you definitely do not get paid for. Anything above and beyond could warrant an allowance.”
Like every other area of child-rearing, whether or not you provide your children with an allowance is a personal decision. Just remember that no matter which path you choose, the discussion of allowance is an important teaching opportunity, so don’t forget to talk about your decision and let your children have their say.
Learning to save
You can obviously open a savings account for your child any time you’d like, but that’s not the same as teaching your child about the value of saving. Once children have a good grasp on how money works, it’s time to get them onboard with the many benefits of setting aside for later.
Help them pick a goal and create a savings plan to reach that goal. Due to their often litigious nature, children like to have things in writing, so draft something together and have them sign it. Children also tend to respond positively to visual or illustrative representations of their progress, so grab a ruler and some construction paper because it’s chart making time!
How to budget
Saving and budgeting go hand-in-hand, so you can really tackle both subjects simultaneously. Try giving your child a set amount of money and telling them you need to buy all of the items on your grocery list, but all of the leftover money can go into their savings account. Then show them how to clip coupons and compare prices to save even more money.
Meanwhile, continue to be open about your household finances. Show them your family budget and keep them in the loop whenever financial circumstances cause a change to your routine – even something as mundane as switching cable providers is another opportunity to teach your child about budgeting and saving.
First checking account
Age: 12 and up
As your child approaches their teenage years, they’ll be growing increasingly independent in almost every way imaginable. They’ll also be better able to earn their own money and significantly less inclined to hang that money in a frame above the stove.
Depending on their maturity and your personal beliefs, you may want to consider helping your child open their own checking account around age 12 or 13. Whenever you decide it’s right for your child, be sure you discuss the situation and ensure that everyone (even you) has a clear understanding of what the responsibilities will be going forward. Be clear about how much input you’ll have over how your child’s accounts are handled so there are no misunderstandings or hurt feelings going forward.
Credit cards, credit reports, credit scores
Age: 14 and up
If you’ve done a good job conveying the gravity, complexity and importance of good personal finances throughout the first 14 or so years of your child’s life, than the idea of them with a credit card shouldn’t be wholly terrifying. Still a little terrifying, yes, but not soul-crushingly so.
Which isn’t to say that your 14 year old needs a credit card, but rather that the period prior to driver’s education and college applications is a great time to start learning about the ins and outs of using credit.
Most importantly, it’s a great time to provide your children with the knowledge they need to build good credit throughout their lives. So take the time to explain how credit works. The better children understand just how much credit will impact their future lives, the more likely they are to make smart choices with credit cards, loans and saving accounts. And best of all, the better they are with money, the less help they’ll need from you!
For more insight on teaching your children about money, visit the Youth and Money section of our website for lots of great articles and resources. We've also got a great collection of lesson plans to help you teach young children about finances. And don't forget about all of the fun, kid-friendly materials at MoneyBunny.com!
Do you have any tips to share? Any lessons learned while teaching your own kids how to handle money?