Your teens have summer jobs? Three financial lessons to teach.
This summer, many teens are working summer jobs and, perhaps for the first time, earning money that doesn’t’ come from family. It’s an exciting feeling of independence – and a key time to learn the basics of money management. That’s where parents come in. Even if communicating with your teenagers about money is sometimes difficult, it is natural for you to be involved because their income from summer jobs will have tax implications for you. Here are three easy financial lessons to teach your teens this summer:
1. Tax forms and direct deposit
Get off on the right foot by helping them fill out the W-4 form for their new summer jobs. Not only can these forms be confusing, figuring out how much to have withheld is a key step in money management. Talk over who will pay the income tax on the earnings from their summer jobs. Then, assuming you have already set up a checking and savings account for them, teach your teens to pay themselves first.
It’s highly important to make saving automatic. Set up direct deposit, so that their money goes directly to the bank and not through their hands. You can divide their paychecks over multiple accounts, which makes it possible for your teens to automatically put a portion of their earnings away in a savings account while keeping the rest in a checking account for spending money. Sit down with your children and discuss which portion of their paycheck they should save. Understanding and utilizing the best available money management options lays the foundation for responsible financial habits for years to come.