When is a child ready for an account of their own? Part I

By Brandon Kathman, Communications Specialist

School did not prepare me to handle money in the real world, and I'm in good company. Almost 90% of adults say they graduated ill-equipped to manage their own resources, and reforming our schools' approach to financial education has come slowly. For better or worse, these skills must still be taught in the home.

I believe in experiential learning, and financial responsibility is predicated on firsthand experience managing personal wealth. If squirreling cash under the mattress is ill-advised, handing children piggy banks hardly seems productive. We manage our wealth in the digital space, and financial institutions reward us for doing so. Accounts are tools, and we should teach kids how to use them. It's best to introduce them to the functions of different accounts in stages, but age is not always the best indicator of readiness. With financial literacy being as fundamental to success as reading comprehension, I've provided some benchmarks in functional literacy for context.

Savings Accounts: The Magic Treehouse Stage

I recommend opening a child's first savings account just after they've learned to read. If they can tackle a Magic Treehouse book, they're probably ready.

Saving is the foundation of responsible money management and a keystone to lifelong wellness. It's a concept so simple that even young kids can grasp it, yet so fundamental that it's a prerequisite for all other lessons. Without comprehending its importance, a child will only think of the here and now. Should you hand them $20, they will immediately seek products costing no more than $20.

Start by talking with them about goals. With an objective in mind, they will realize their allowance might only buy a single video game; however, a year's worth of allowances and birthday money (coupled with a favorable interest rate) could buy an entire gaming system. A high-yield savings account is an obvious choice, as paid interest will be noticeable to the child over time. Having their balance and other data available at the push of a button is incredibly useful, though funds still must be withdrawn before they can be spent. Of course, bear in mind that an adult in their life will always need to be attached to the account.

As seen in Youth Connections' October 2023 edition

https://www.tlc4cs.org/youth-connections-magazine/