We’re all familiar with developmental milestones as kids grow. From cheering on their early motor skills like crawling and walking to celebrating their first days of school, each one is a step on their path to independence.
Most of the well-known money milestones, like first jobs or a first car purchase, come later in the teen years or young adulthood, but the foundation of financial capability begins much, much younger. In fact, research shows that money attitudes form as early as age 5, and habits can form by ages 7 to 9. A new Greenlight survey even found that financial anxiety can begin as young as age 14, underscoring the importance of educating kids on these important topics while they’re young.
In my work educating families about money as Director of Education at Greenlight, one thing I hear often from parents with multiple kids is how differently each child approaches money. That rang true in my family, too, with my three kids! Whether you have a natural saver or a spender, or whatever their financial goals, parents can guide their children—and redirect as needed—during this formative time of development.
By understanding the building blocks, it’s possible for parents to help their children develop the knowledge, norms and decision-making skills that will prepare them for financial independence as young adults. Financial capability is all about how well you can manage money, make sound decisions to achieve financial goals, and build economic stability.
Three ways that kids gain financial capability include modeling, learning by doing and talking about money. This is called financial socialization. When money is actively discussed at home, kids are more likely to have positive financial outcomes. Here’s a guide by age with tips for each money stage.
8 big money milestones for kids
Early childhood
Money awareness
Counting is a great introduction to currency. Learning the value of money is core in early childhood, and preschoolers can understand the basic concept around age 3. They may not automatically understand the exchange of money for goods and services, but you can explain it when you go to the store or make purchases. Goods cost money.
First allowance
An allowance provides first-hand experience with financial decision-making. Kids often think differently about their own money and begin to understand another essential money concept: Money is not unlimited. Adults work for income, and kids can, too. Many families tie allowance to chores so that kids also learn that money is earned. Once they begin managing money, they can learn to save and spend wisely.
Elementary years
First saving goal
As kids develop the ability to think beyond the immediate future, they can learn to plan for it. For example, if they’re close to outgrowing their bicycle, they may want a new one in three or six months. Parents can use this opportunity to help their kids plan for the future and prioritize it by delaying immediate gratification. They can learn how saying “no” to an impulsive purchase now, like a new toy, can help them reach a more important longer-term goal, like their new bike. Think of the future, not just the present moment with money decisions.
Regular saving
Once kids accomplish their first goal, they’re ready to go! They can put saving into regular practice anytime they receive money, even from a weekly allowance. Save for the future and the unexpected. Parents can explain the concepts of emergency funds and rainy day funds, which will enable them to have money when they need it—or want it. Financial preparedness contributes to positive money experiences.
Tween years
First budget
Once they reach the tween years, kids can take on more responsibility for their spending. They may already have their own debit card to get real world banking experience. As they earn more money, it’s even more important to put budgeting into practice. Start with explaining it in a way that they understand. Budgeting is a plan for their money. It helps them decide how to use their money wisely, no matter the amount of their income. By understanding where their money goes, they can ensure that their spending decisions align with their financial goals and values.
First investment
Many kids are eager to learn about investing! It’s a way to build long-term wealth and prepare for the future. Due to the power of compounding, which is money earned on money earned, longer is better for investments. That means an early start is so beneficial! With their parents’ help, tweens can begin to research the stock market and buy fractional stocks or exchange-traded funds (ETFs). Time is the magic in building wealth.
Teen years
First credit card
It’s important for teens to be prepared to manage their credit in the near future. They should understand that their credit score can affect their ability to get loans, rent apartments, or even land certain jobs. Emphasize good financial habits, like paying bills on time, keeping credit card balances low, and not opening too many new accounts, which will boost their credit score. With the right education and preparation, their first credit card can allow them to start building and managing credit with your oversight, even before they turn 18. Explain the benefits and risks of credit, including the cost of debt and how interest rates affect financial decisions. Good credit unlocks big things.
First major life decision
By the time teens get to high school, they’re preparing for their first major decision in life—what to do after they graduate. The choices they make will have a significant impact on their earning potential and how much they will pay for post-secondary education, which could mean student loans. If they have a positive attitude toward money management and confidence in their ability to make informed choices and achieve financial goals, they’ll be on their way to a financially healthy and happy future.
Greenlight’s survey showed that 75% of Gen Alpha and Gen Z want more personal finance education. Remind them that learning about money and finances is a lifelong journey! Young adults may make money mistakes or face a financial challenge, but the more practice they have under your supervision can help them avoid some mistakes when they go off on their own. If they know how to make sound financial decisions and follow through with them—that’s the best head start a parent can provide.
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