Financial Milestones for Kids

I was recently interviewed by a reporter who wanted to know when children should get various money privileges and responsibilities -- such as starting an allowance, opening a bank savings account and budgeting for expenses.

That got me thinking that readers of this column would appreciate such a list, too. I've expanded it to include a timeline of financial milestones for kids, from preschool to college.

Preschool. Start with the big picture, by showing children that money can be exchanged for other things. Let them put coins in a vending machine or use their birthday money to buy something at the dollar store. They can play with fun savings banks, learn the difference between a penny, a nickel and a dime, or collect state quarters. Keep it simple, and don't expect too much.

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Ages 6-7. Set up an allowance. Kids are learning about money in school and becoming more sophisticated. They understand that four quarters equal $1, and they have some sense of how much $1 will (or won't) buy. Making choices about how they spend their own money is a great hands-on learning tool. Think of it as stealth budgeting.

Ages 8-9. Open a bank savings account. Of course, you can start saving for your kids when they're much younger, but they have to be a bit more mature to appreciate how a bank works. It takes them a while to understand (and accept) that if they deposit, say, a $10 bill, they'll get their money back -- but not the same $10 bill.

Ages 11-12. Expand the allowance to include additional responsibilities, such as paying for mall excursions with their friends and buying gifts. This is also a good time to introduce kids to the basics of investing -- namely, owning shares of stock means being part owner of a company whose products they use or whose stores they shop in.

Ages 14-15. Encourage kids to get a job, at least over the summer. Teens this age are permitted to work in offices, amusement parks, movie theaters, restaurants, supermarkets and other retail stores. Arrange for them to have an ATM card, so they can deposit and withdraw their earnings from their own savings account.

Ages 16-17. Put teens in charge of a clothing allowance. If they don't already have a part-time or summer job, now's the time to get one. Now's also the time to open a checking account and get a debit card, so they can learn how to manage their money before they head off to college (co-sign the account if the bank requires it because they're not yet 18).

Age 21. Young adults are ready to apply for a credit card, after they've had experience managing their money at college or on their own.