Your teen’s first job might be bagging groceries at your local supermarket, or it might be life-guarding at the local swimming pool. It doesn’t matter what his first job turns out to be, there are certain things that he should know before working at his first job.
Your teen probably already has a bank account. If he doesn’t, help him to open a savings account and to develop a budget that will include regular deposits into that savings account.
If his budget doesn’t include regular savings deposits every single pay day, he might give into temptation to purchase all the goodies that he never had enough money for in the past. This point in his life could pave the way for continued good money managing or it could erode his previous good financial habits if he doesn’t proceed carefully.
Your teenager probably will already have a rudimentary knowledge about tax before he gets his first job. He will have overheard you talking, or perhaps complaining, about how your income is taxed.
He will probably not actually understand the tax system, and you will need to explain to him how he will be taxed. The first thing to do is to help him get a Tax File Number, which he’ll need when he fills out the tax form on his first day at work.
Explain to him that if he expects to earn less than $18,200 in a year, he will not have to pay tax and should claim the tax-free option on the tax declaration form at work. Otherwise, his employer will have to withhold up to 50% of his income in tax.
If he works for more than one employer, then he should claim the tax-free threshold at the job that earns him more.
Teach Him About Superannuation
Even though he’s a teen, he needs to learn about superannuation. If he is under 18, works 30 hours a week, and earns over $450 gross in a month, he is eligible to have his employer make superannuation contributions.
Go over the different kinds of superannuation accounts so that he picks the one that is right for him at this point in his life and, hopefully, in the future as well.
Daily Spending Habits
Without being overbearing, talk to your teen about his daily spending habits and encourage him to continue the good financial habits that you instilled in him as he was growing up. Remind him to track his budget continuously and keep on top of his daily spending so that it doesn’t invalidate the budget that he put together so carefully.
Teaching kids how to spend and save has its benefits and will mean they are more confident with money as they get older. Of course, you can teach these principles using real money using piggy banks, jars etc. Alternatively, you can use other made up currency like stickers, stamps, play money or blocks if you don't want to use real money.
However, as your child starts school and is exposed to school banking and banks in general the next step you may want to explore is opening a bank account for your child. Many parents already save for their child, in some cases from the moment they are born, but usually this money is in a bank account in the parents name.
When looking for an account for your child, that is in your child's name, there are a few things to look for. These are:
1. The Interest Rate
Have a look and see what the interest rate is. Pay particular attention to what is required to achieve it. For example, do you need to deposit a certain amount per month? Are there limits on the amounts you can put in to receive that interest rate? Do you receive bonuses for certain behaviour? or do you still get an interest rate if you withdraw money? These concepts are usually referred to as a base rate of interest and a bonus rate (this is the rate of interest you will receive above the base rate if you meet certain criteria that the bank defines).
2. Fees or Hidden Charges
See if there is an annual or monthly fee just for having the account opened. The last thing you want is to have your child's hard earned money eroded by fees. Luckily though most children's bank account I've seen do not have a regular fee. Be mindful if there are fees for replacement cards, statements etc.
3. Parental Access and Control
Being able to have visibility of your child's account especially when it comes to what and how much they spend can be something you are looking for. This is especially true when they are younger and are first exposed to debit cards. Look for accounts that have this feature or see what options are available.
4. Can the Account be Opened in a Child's Name?
Read the details of what's involved to open an account in your child's name. Some banks do not offer this or have minimum ages so it is best to check up front. Also, look at what's required to verify their identity. Usually a birth certificate or ID forms are required.
Have a look at the features of the account. Some accounts are purely savings accounts and have to be linked to another account. Others have debit cards and the ability to pay bills or transfer money to others. Decide what you need then see which accounts has these features.
For those of you in Australia, InfoChoice has a good comparison table of Kids Bank Accounts.