What Age Is the Best for Kids to Start Managing Their Own Money?

Managing personal finances proves a difficult challenge for many adult Americans. In fact, 13% of Americans spent more money than they earned over the first six months of 2022. What’s more, 61% of Americans live paycheck to paycheck, creating stress and limitations for those individuals. While nationwide economic challenges play a role in a person’s financial wellbeing, so, too, does their financial literacy. That’s why financial education for youth is so important.

Financial education for kids enables them to have a sound financial future. At Indiana Members Credit Union (IMCU), we’ve created several materials and opportunities, including a savings account for kids and starter credit cards, to assist you in teaching your child about managing their finances. In this blog specifically, we’ll discuss:

How important this financial education is
When to start teaching your child about money management.
How to teach your child to manage their money.

Why Is It Important to Teach Children to Manage Money?

It’s important to teach children to manage their money so that they are prepared for adulthood. Teaching proper money management encourages your child to build habits like saving money, spending within their means, setting financial goals, and making financial plans. These habits, in turn, will empower them to buy a new home or car as well as make other large financial investments in the future.

Kids must get this financial education at home because only seven states in the US actually require that high school students take a personal finance course prior to graduation. Parents, then, assume a crucial role in further developing their sense of financial responsibility. This means many children don’t learn how to manage their money before they reach the “real” world, and figuring it out as they go leaves many stressed and uncertain in their adult lives. If you promote financial literacy for your kids at a young age, they’ll grow up to have more confidence when making financial decisions.

At What Age Should Kids Learn to Manage Money?

Believe it or not, kids can actually start learning money management skills as young as three years old. But at what age do kids understand the value of money? The answer is likely to surprise you! It’s been suggested that for many young people, certain money habits are set by age 7. Nothing is set in stone at that age, though. So, while you probably won’t be teaching your child about interest rates or other complex budgets at that age, you can teach them “things like budgeting, delayed gratification, and saving”—and that money they earn can be saved, spent, invested, or donated.

Once kids start going to school and learning how to count money, you can teach them about earning and saving money to buy something they want. Creating a minor savings account helps to make this process more tangible.

Once your child becomes a teenager, they will, ideally, possess a basic enough understanding of money that you can teach them about how credit works, particularly about borrowing and paying back money in a timely manner. After they turn 18, you can encourage them to get a starter credit card like the Jumpstart credit card through IMCU to build their credit score, setting them up for major milestones that are just around the corner, like securing an apartment, buying a car, and so on.

How to Teach Your Child Financial Responsibility

To teach financial responsibility and money management for kids, you can utilize any or all of the following methods:

Play money-related games. Board games like Monopoly and the Game of Life work well, as do online games like Lemonade Stand, Peter Pig’s Money Counter, and Financial Football. These are fun, hands-on ways to teach your child about spending and saving their money.
Model financial responsibility. Much of what a child learns about financial responsibility comes from the habits they see modeled by their parents and other adults. Be mindful of what lessons you might be teaching—taking care, for example, not to make too many impulse purchases. Instead, let them see what responsible decision-making looks like. For a more engaging lesson, provide a little spending money and guide them to prioritize wants vs needs in order to make a wise investment.
Open a minor savings account. It’ll grant your child some financial freedom to spend and save their money while you monitor their accounts and correct them should they try to spend more than they have. With an IMCU minor account, your child will also have access to SmartStart, an interactive tool that teaches kids, teens, and young adults about managing their money. To further incentivize saving, consider matching any money your child decides to save—similar to how many employers match 401(k) contributions, for example.
Help them get their first credit card. For many parents, this can be a scary milestone. If you’ve taught the fundamentals of spending and saving wisely, though, it doesn’t have to be such an intimidating prospect. It’s best to begin with a starter card, like IMCU’s Jumpstart credit cards. Ideal for 18-21 year olds, these cards can help them build credit—while offering plenty of opportunities for parents to oversee and manage their accounts.

IMCU: Paving the Way for Financial Responsibility

IMCU provides a wide range of child- and parent-friendly solutions for teaching financial responsibility and building effective habits for saving, spending, and investing. Whether you opt to take advantage of our SmartStart program, Jumpstart credit cards, or both, you can achieve the perfect balance between empowering your child to become financially responsible and monitoring and managing their accounts to ensure that they’re making the best decisions possible.