Graded Exams:
Graded exams can be measures of a student's progress, supplying the individual with periodic, achievable goals. Something to shoot for It does have to be remembered, however, that in many areas of both formal and informal education it is entirely possible for a student to pass a series of exams, whilst not actually progressing in overall musical ability. In other words, they study for the exam, and not for the actual skills involved. I avoid this syndrome wherever possible
My students would not be advised to put in for a grade if they were not actually at - or beyond - the required level. For me, the end result is the ability to play music, not (necessarily) the simple possession of a piece of paper. My approach is flexible and dynamic, tailoring the practice requirements to the individual students' needs and abilities.
The whole process should be enjoyable and rewarding. And the student must know that the actual grade certificate had been well-earned. There are several bodies that conduct musical grade exams. I favour the ABRSM. THIS link takes you to their web site