With summer approaching, your teen may be thinking about how to earn cash during the break. Summer jobs are often the gateway to taking on adult responsibilities like the money management skills that come with every paycheck. Here’s how to help your teen learn to manage his summer job money and prepare for a lifetime of good financial habits.
Review hiring documents
Encourage your teen to bring home all documents. This way you can explain how many tax allowances to claim and if he should withhold any additional taxes from each paycheck. This will also open the door for a conversation about the impact of taxes on his earnings. Working together, you can ensure everything is completed properly.
Introduce your teen to savings and checking
If your teen doesn’t already have a checking and savings account, plan a trip to your credit union or bank. Help your teen set up direct deposit for her paychecks and make sure automatic saving is in place. Youth savings and checking accounts give your teen the freedom to manage her own money while giving you the flexibility to monitor her spending each pay period.
Explain the first pay stub
It’s important for your teen to understand the difference between gross and net pay. Review the first pay stub together to help him understand how withholdings will impact take-home pay and how these withholdings will continue, and likely increase, into his future working life.
Have conversations about budgeting and saving
Your teen will likely want to spend the money she earns as fast as she gets it. Now is a great time to introduce budgeting and saving skills. If there’s something she needs or wants to save for (e.g., car or college tuition), urge her to put away at least a minimum amount each pay period to help reach that goal. Using the remaining money, help your young adult create a budget that allows for things like entertainment and meals with friends, so she doesn’t run out of money between paychecks.
Helping your teen manage money from his first job is a great way to set the foundation for a better financial future.
Article provided by Local Government Federal Credit Union. The advice provided is for informational purposes only.