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A Guide to Age-Appropriate Financial Steps for Children

Children can begin learning money management skills almost as soon as they walk. Use the following money milestones and suggested activities to help your child start down the road to financial success.

Preschool (Age 3-5)

Money Identification
Show coins and paper currency to your child and explain the value of each one.

Saving
Help your child learn to save by regularly setting aside money in a piggy bank.

Buying goods and services
A game of pretend grocery shopping can help small children understand that it takes money to purchase goods and services.

Elementary School (Ages 6-10)

Budgeting

If your financial circumstances permit, give your child a weekly allowance. Experts say it’s okay to allow children to spend the money as they see fit, but you also should provide guidance on smart ways to use their allowances.

Financial goal-setting

Encourage your child to save for both short-term and long-term goals. Perhaps they want a moderately-priced toy and an expensive toy. Work with your child on creating a savings plan to help them reach both of those goals.

Building good savings habits
Take your child to a local bank or credit union and help them open their first savings account. Explain how banks often pay interest on money in savings accounts.

Credit cards and ATM cards
Children see credit cards used regularly for transactions and are usually present in the car for trips to the ATM machine. These transactions offer you the opportunity to explain that ATM cards withdraw cash directly from a checking and savings accounts and to teach them how credit works.

Middle School and Junior High (Ages 11-15)

Checking accounts
This age is a good time to introduce “pretend” checking accounts that teach children about proper check-writing technique, withdrawals, and recordkeeping.

Investing and the stock market
Consider exposing children to various investment options (i.e. mutual funds, IRAs, individual stocks, etc.) and teaching them how the stock market works.

Credit cards and interest
Consider giving your child a pre-paid credit card and explaining to them how to use credit wisely. This is an opportunity to explain how compound interest works for you when your money is invested properly and how it works against you when you are charged interest on your credit card balances each month.

High School (Ages 16-18)

Checking accounts 
Once your child has a checking account, be sure he/she knows how to record all transactions (checks and debit card purchases) and can reconcile his/her bank statements each month. Warn them that the balance they see online or get over the telephone may not be the actual balance in the account if checks or debit card charges have not yet cleared.

Credit cards 
It’s very important for your child to use credit responsibly. Remind your student that employers often check credit reports of future employees. College students are often tempted with offers for multiple credit cards, and it can be easy to run up quite a bill. Explain to your child the dangers of credit cards and work with them to build a good credit rating. Consider giving your child a credit card for one specific purchase type, such a gasoline. Review the charges with them each month when the bill is available. You can incorporate budgeting concepts by adding a monetary limit. For example, agree to pay for up to a certain monthly dollar amount and they pay any excess.

Bill paying techniques 
Be sure your high school student understands how to pay the bills. Many students go off to college or move out on their own and don’t know the importance of paying their bills on time. Remind them that most bills today can be paid online if the child has problems meeting deadlines.

Paychecks and taxes 
Students holding part-time jobs are sometimes shocked when they receive their first paychecks. They are not accustomed to reading a paycheck and are often surprised about the amount of money withheld for taxes. Take the opportunity to review the paycheck with the student and explain how the taxes collected are used to build roads, provide police and fire department services, and fund other government programs and services. This also may be a good time to talk with students about filing a tax return for the first time.

Additional Ideas
Visit the Visit the AICPA site, 360 Degrees of Financial Literacy for more articles on teaching children about money.

(Updated 2015) Reviewed and edited by Jason Freeman, CPA, Meadows, Collier, Reed, Cousins, Crouch & Ungerman, L.L.P.