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 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 your young adult should withhold any additional taxes from each paycheck. This will also open the door for a conversation about the impact of taxes on earnings. Working together, you can ensure everything is completed properly.
Explain the first pay stub
It’s important for your working teen who’s earning money to understand the difference between gross and net pay. Review the first pay stub together to explain how withholdings will impact take-home pay and how these withholdings will continue, and likely increase, into the future.
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 paychecks and make sure automatic saving is in place. Youth savings and checking accounts –which are held jointly between you and your teen — give your child the freedom of money management while giving you the flexibility to monitor spending each pay period.
Have conversations about budgeting and saving
Your teen will likely want to spend the money earned as fast as its earned. Now is a great time to introduce budgeting and saving skills. If there’s something your young adult needs or wants to save for (e.g., car or college tuition), urge your teen 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. This way your teen will be less likely to run out of money between paychecks.
Helping your teen manage money from a 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.