As a money-conscious parent, you know how important it is to teach your kids about finance, and that the process of doing this takes years. Still, with so many topics to cover, many parents are a little lost about when they should be teaching what. The general guideline is that you stay relatively concrete until around age seven, after which you can delve into more abstract financial concepts with more gusto.
Here’s a breakdown of goals your child might have as he grows:
Age 0-2
- Tell you which coins and bills are which by characteristics, such as color or the person on them (money recognition)
- Count how many bills or coins you have (the denomination doesn’t matter quite yet)
- Trade money for objects in play (introduces the idea that money can be used to get things and has value; teaches basic transaction protocol)
Age 3-5
- Recognize numbers on sale papers, coupons, and other financial documents
- Perform basic chores (e.g., picking up toys, feeding the family pet) to earn small amounts of money
- Keep money in a piggy bank
- Help you go through the transaction process in stores (e.g., hand the clerk cash or your card, put items on the conveyor, etc.)
Age 5-10
- Count bills by denomination
- Set money aside for and track progress toward a specific money purchase
- Make change
- Choose a charity to donate money to
- Choose between two items in the store; be able to say why he picks one over the other
Age 10-15
- Set up a bank account
- Write a check
- Buy a savings bond
- Create and follow a basic budget
- Pay for items with cash or a debit card on his own (especially “extra” items)
- Do extra jobs for you or friends and family to earn money
- Read bank statements
Age 15-18
- Set aside some money for college
- Choose and buy stock (be sure to diversify!)
- Help you with your credit card (Take him through the process you use and have him prove he can follow it before you agree to cosign on anything and give him formal authority on an account.)
- Get a regular part time job
- Practice filling out tax forms
- Start a retirement account (yes, this should start this early)
Things to Remember….
As your child passes through these stages, keep in mind that every kid is different. If your child isn’t quite ready to count by denomination around age 5, for example, don’t sweat it. He’ll get there. Conversely, if your child turns out to be a regular whiz, feel free to go to more advanced financial topics based on his capabilities. Regardless of where your child is, always be encouraging, providing new hands-on opportunities and trying to find new ways to present material.
Another thing to remember through this process is that, if your child wants to walk the money walk, he’s got to learn to talk the money talk. Be prepared to give very clear definitions for financial vocabulary, such as interest, inflation, bank, mutual fund, time horizon, and trade off. Without clear definitions, your child likely will struggle to really grasp and apply the concepts the te