Spending in the present while saving for the future are two key money concepts every child and adult must learn to balance. Spending and saving are mutual partners in that savings frequently support future spending objectives (i.e., college or retirement). SageVest Kids offers an overview of saving and spending milestones for kids, by age, to help you instill strong and healthy financial habits in your children.
Saving and Spending Milestones – Ages 3-4
Saving Milestones
It’s best to keep conversations about money simple with young children. Talk about what money is, how it’s used, that you earn money to buy things, and the difference between needs and wants.
Try using a transparent coin jar to collect loose change. This helps familiarize your kids with coins and counting, and demonstrates how money accrues. Provide plenty of encouragement and make learning about money fun!
Spending Milestones
The grocery store and the bank are great places for your kids to observe money at work in real life. Imaginative play, such as playing store, is another way to reinforce money concepts.
Once your child’s savings reach a modest level, allow them to make occasional withdrawals for inexpensive purchases under your supervision.
Saving and Spending Milestones – Ages 5-7
Saving Milestones
Your kids are likely old enough to introduce a small allowance, paid weekly in cash. Some parents tie allowance to household chores.
Transparent money jars are still effective so your child can watch their savings grow. It’s all about learning that saving now enables something more valuable later, whether it’s a desired toy or a holiday gift for a loved one.
Children this age may struggle to verbalize realistic savings goals. Keep them engaged by helping them define one or two fun, small savings goals. Write the goals down, and use visual prompts like pictures, graphs and stickers to encourage progress.
Spending Milestones
Continue to supervise purchases, setting limits on how much your kids can spend and on what. If necessary, make them leave some allowance at home.
Help your kids learn wise spending habits by explaining coupons and sales, how you make purchase decisions, and by being a good financial role model yourself.
Saving and Spending Milestones – Ages 8-10
Saving Milestones
An expanded concept of the future allows kids between 8-10 to initiate a goal-oriented savings plan. A birthday or the start of the year are great times to develop a plan together. Use visual prompts so that they can see how far away the goal is and can track progress. Goal-oriented saving is ideal for teaching your child to save for longer term wants. Learning to set and achieve attainable goals fosters a sense of accomplishment and inspires greater goal-setting. What your kids are saving for doesn’t matter as much as the process of learning how to save for the future.
Help your child establish their first bank account. Studies suggest that kids with savings accounts are six times more likely to attend college [1].
Spending Milestones
Your kids now have a greater appreciation for money and how it works, yet they might still make imprudent spending decisions. The good news is that mistakes offer learning opportunities, including a number of important financial lessons:
• The value of money versus what they get for it.
• That they can’t buy everything.
• That money runs out if mis-spent.
• That there may be no more money available (unless you tie chores to allowance and are willing to let them do additional chores).
If you haven’t already done so, consider introducing purchase responsibilities, items your child should now be accountable for e.g., gifts, vacation souvenirs, and arts and crafts supplies.
Also, if it aligns with your family values, introduce charitable giving as a form of budgeting and allocating financial resources.
Saving and Spending Milestones – Ages 11-13
Saving Milestones
As peer pressure builds, it’s a prime time to reinforce family values, including good savings habits. Create a budget together so your tween can see how income, spending, and saving interconnect.
It’s also time to introduce longer term savings goals like college and car costs. Outline what your tween will be expected to contribute now, so that they can start saving. Consider a separate savings account and/or require a set amount be put aside monthly towards such goals. Apps like Goalsetter can help define goals and track progress.
Spending Milestones
Your tween’s purchase responsibilities should now include both wants and needs. Go shopping together to help your tween make wise spending decisions based on value and need. If your tween wants a more expensive designer item, make them pay the differential, to highlight the premium attached to more costly items.
Online banking and budgeting apps allow for greater spending autonomy for your tween and easier oversight for you.
Saving and Spending Milestones – Ages 14-16
Saving Milestones
Your teen may be ultra-focused on saving now, because having their own money equates to independence, which every teen craves! Research suggests that teen saving is closely related to adult saving [2].
Young people are more likely to fall victim to scams and identity theft than older adults [3], so teach banking basics such as account security and how to carefully monitor account balances and expenses.
Spending Milestones
Continue layering on purchase responsibilities. Your teen should now be self-funding almost all wants e.g., cosmetics, accessories, and outings, plus a range of basic needs that you determine together such as sporting equipment, art supplies, and technology upgrades. Remain involved in spending decisions to provide guidance.
Adjust your teen’s allowance to account for increased spending needs and outside income, carefully evaluating disposable income. Allowance should now be paid monthly, encouraging increased budgeting skills.
If your teen runs out of money, consider extending a loan to teach them about debt.
Saving and Spending Milestones – Ages 17-18
Saving Milestones
Be mindful of the Wealth Effect and the expectations your child’s current lifestyle instills. Talk with your teen about careers, earnings, and other choices that will impact their future lifestyle.
If appropriate, encourage your teen to apply for scholarships, part-time employment, summer jobs and internships, to gain experience and help boost college savings.
Spending Milestones
Spending should now include more real-life expenses e.g., paying for gas and car insurance. The goal is for your teen to possess a sound knowledge of what things cost, the value of items, and how to comparison shop.
Don’t forget to discuss credit cards while your teens are still under your watch. Explain how they work, and the dangers of credit card debt and high credit card interest rates.
Learning to set financial goals, budget sensibly, and accumulate savings are key life skills that will help your kids become more successful, happy, and financially stable adults. SageVest Kids is dedicated to helping you teach your kids about money, and is brought to you by SageVest Wealth Management. Please contact us to learn more about our family-focused wealth management services.
