🎯 In 30 seconds: Children learn money by handling it, making small mistakes while the stakes are low, and watching what you do. Start with waiting and choosing, move to a regular allowance and a savings goal, then a real budget and a debit card, and a Roth IRA once a teen has a paycheck.
What to teach at each age
| Age | What they can learn | Try this |
|---|---|---|
| 3 to 5 | Money is swapped for things; you have to choose; waiting is part of it | Let them pay at a store; use clear jars for save and spend so they can see it grow |
| 6 to 10 | Prices differ; saving for something takes time; needs versus wants | A regular allowance, a savings goal with a picture, comparing two prices at the store |
| 11 to 13 | Budgeting over weeks; interest; online purchases and scams | A monthly budget for something real (clothes, school lunches); a savings account; talk through in-app purchases |
| 14 to 18 | Paychecks and taxes; debit versus credit; how credit scores work; college costs | A first job, a checking account and debit card, a Roth IRA, and reading their own pay stub |
The CFPB’s Money as You Grow has activities for each stage, and the FDIC’s Money Smart for Young People has free lessons for parents and teachers.
Allowance approaches
| Style | How it works | Teaches | Watch out for |
|---|---|---|---|
| Fixed allowance | Same amount each week, not tied to chores | Budgeting and choices | Needs a clear list of what they now pay for |
| Commission | Paid per job done | Work earns money | Kids may skip chores when they do not need cash |
| Hybrid | Basic chores expected unpaid; extra jobs paid | Both | Takes a little more tracking |
A common split is save, spend and give. Whatever the amount, the teaching comes from letting them spend it badly once and live with it.
Custodial accounts (UTMA and UGMA)
- An adult opens and manages a brokerage or savings account for a child. The money legally belongs to the child from the day it goes in, and the gift cannot be taken back.
- Control passes to the child at the age set by state law, usually 18 or 21, and they can spend it however they like.
- On the FAFSA it counts as the student’s asset, which generally reduces aid more than parent-owned savings such as a parent-owned 529.
- Investment income above a modest yearly amount can be taxed at the parent’s rate (the "kiddie tax").
A custodial Roth IRA
A child of any age can have a Roth IRA if they have earned income: wages from a job, or real self-employment like babysitting or mowing lawns. Gifts and allowance do not count. For 2026 the most that can go in is the lower of $7,500 or the child’s taxable compensation for the year. A parent can fund it as a gift as long as it does not exceed what the teen earned.
| Teen earns at a summer job, age 15 | $3,000 |
| Most that can go into a Roth IRA | $3,000 |
| Value at 65 at an assumed 7% average return, no more deposits | about $88,000 |
Keep records of self-employment income (who paid, when, for what). Contributions can be withdrawn later without tax or penalty; earnings have more rules.
Trump accounts are a new kind of traditional IRA for minors created in 2025. Treasury will deposit $1,000 for eligible US-citizen children born in 2025 through 2028 if a parent elects it on IRS Form 4547. The rules were still in proposed form when this page was written; check the IRS announcement for the current status.
A first debit card
- Most banks require an adult on the account for under-18s. A teen checking account with no overdraft fees and overdraft coverage turned off is a good start.
- Turn on alerts for every purchase and a low-balance alert. Review the statement together monthly for the first few months.
- Teach the liability rule: report a lost card or unauthorized charge within 2 business days and the loss is capped at $50; wait longer and it can reach $500 or more. Credit cards carry stronger protections.
- Teach the scam basics: never share the PIN or a one-time code, and nobody legitimate asks for payment in gift cards.
Once they are earning, show them how their first paycheck connects to the 12 moves.