Financial Terms to Teach Your Children at 5, 10 and 15
One of the most important tasks for parents to tackle is ensuring that their kids have a proper understanding of how money and finances work. Providing your children with a solid financial literacy foundation sets them on the path to be financially responsible adults.
T. Rowe Price believes it's best to begin with the basics and, in this case, that means vocabulary.
Here is a list of financial vocabulary terms children should learn by the ages of 5, 10, and 15.
Teaching these age-appropriate terms and discussing them early and often with your child helps him or her become a Finance Smarty Pants.
Terms to know by 5—laying the foundation and easy to understand
- Savings Goal—a savings goal has three elements:
(1) what you want to buy,
(2) when you want to buy it, and
(3) how much it will cost at that time.
- Bank—a place that helps us safely store, organize, and manage our money
- Check—a way to pay for items by writing a note to the bank to send our money to someone to pay for our purchases
- Bills—reminders telling us how much we owe for our purchases
- Trade Off—deciding whether to spend money on something we want right now or to keep that money for our savings goal
Terms to know by 10—building on what has already been learned
- Interest—money paid to you for lending your money or money added to money you borrowed
- Loan—money that is borrowed and is expected to be repaid, usually with added interest
- Time Horizon—the amount of time you are saving for a big purchase
- Inflation—a general increase in the price of goods and services over time
- Taxes—money paid to the government to support public programs and necessities
Terms to know by 15—expanding understanding of advanced important concepts
- Investing—putting money into assets (like stocks, bonds, mutual funds, etc) to help reach your financial goals
- Asset Allocation—how your money is divided among asset classes such as stocks, bonds, and short-term investments
- Diversification—spreading your money among various types of investments within an asset class (different kinds of stocks and different kinds of bonds)
- Stock—a share of a company that is sold to the public
- Bond—an IOU issued by the federal government, state governments, or corporations with which you earn interest and receive your investment back at a later date
Need a little help?
T. Rowe Price has more ways to teach your kids about money. We've created the Star Banks Adventure® app, a fun game where kids can solve puzzles, answer quiz questions, and use power-ups to triumph in this space adventure game while still learning about investments, inflation, saving, and goal setting.
Additionally, T. Rowe Price has created Journey to Your Dream Goal, an activity book that uses puzzles, games, and challenges to teach kids valuable lessons about important money basics.
These free tools are designed to help parents make the topic of money fun and interesting and give children the critical money skills they need for a sound financial future.
Visit MoneyConfidentKids.com for more information
The Star Banks Adventure® app is available for download at MoneyConfidentKids.com.