The Summer Job Opportunity and Conversation

Talking to your kid about money

Landing their first paying job is a big milestone and thrill for many teens. In addition to teaching them responsibility and helping them develop a solid work ethic, a summer job also provides the opportunity to learn good financial habits. As their parent or caregiver, you can kickstart that learning process by introducing them to some important aspects of money management.

Here’s where to begin:

Set up a bank account

While your child might like to see money piling up on their dresser, it’s important to convey to them why a bank account is a better option.

Things to share include:

    •  a bank account provides a safe and secure place to keep money
    •  all savings accounts and some checking accounts offer interest, so they actually earn more money while it’s in an account
    •  a bank account makes it easier to keep track of spending
    •  opening a bank account works to establish a credit history that, in the future, can make it easier to get loans and credit cards and to secure them at lower rates/better terms; rent an apartment, and get better rates on insurance
    •  a bank account can teach them basic financial skills like how to make deposits and withdrawals, transfer funds, use a debit card, use online banking, budget, and save

Talk about taxes

Use their first paycheck as a teachable moment to explain the ins and outs of taxes and payroll deductions. Help them understand why their take-home pay is less than their gross earnings and discuss the purpose of various deductions.

Introduce budgeting

Help your child create a simple budget based on their earnings by teaching them to allocate their money into different categories:

    •  Savings (for short-term and long-term goals)
    •  Spending (for immediate wants and needs)
    •  Giving (to encourage charitable contributions)

In this discussion, emphasize the importance of savings and introduce the concept of "paying yourself first" by automatically setting aside a percentage of their paycheck for savings.

Discuss responsible spending

An important follow up to budgeting is the concept of responsible spending. Discuss the difference between needs and wants and encourage them to make thoughtful purchasing decisions.

Set financial goals

Work with your child to set specific financial goals for their summer earnings. Introduce the idea of short-term savings for immediate goals and long-term savings for future expenses like college or a car.

Lead by example

Share your own experiences with money management, including both successes and mistakes. This can help your child understand that financial literacy is an ongoing learning process.

Remember, the goal is to empower your child to make informed financial decisions. By having open, ongoing conversations about money and providing guidance on managing their summer job earnings, you're setting them up for financial success in the future.

DISCLAIMER: This article is meant for educational purposes only and is not intended to be construed as financial, tax, investment or legal advice.