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.
Learning how to budget as an adult is more difficult, so start your child out right by teaching him how to budget while he is young, and you will build good money budgeting habits right from the start.
These lessons are not necessarily easy for either the parents or the child, but when your child reaches adulthood and finds that he is able to manage his money better than his friends, he’ll have you to thank. He might not recognise that his proficiency with money is due to the lessons you gave him early in life, but you will have the satisfaction of knowing.
Include Your Child in Discussions about Your Finances
Lots of parents think that they should never discuss their financial situation with their child. The opposite is actually true. Bringing your kid into the family’s financial discussions will help to give him the context he needs to understand why certain purchases are not made or why holidays are not as elaborate as their friends’ trips.
You will need to determine what level of inclusion is appropriate for your child, but getting him involved even a little when he is young and then increasing his involvement step by step as he matures will give him the working knowledge he’ll need later in life when dealing with his own finances.
A Weekly Allowance Is a Good Teaching Tool
Some parents give a weekly allowance and some don’t. Sometimes the allowance is tied to household chores. Sometimes it’s not tied to chores but is considered a way of teaching kids to budget.
Keep in mind the value of giving an allowance as a method of budgeting for kids.
Simple Is Best for Small Children
Keep budgeting very simple when your child is quite young. The idea is to begin teaching the concepts of saving money for the future and prioritising how to spend it.
Many parents like to use clear glass jars for young children to put money into.
Get More Complex as Kids Get Older
As your child grows, you will find that including him more and more in financial decisions will deepen his learning about budgeting. Watch your child’s attitude toward money to determine how fast to bring him along.
You’ll find that teaching simple budgeting at an early age and then progressing step by step so that he can participate in decisions on bigger purchases will prepare him well for dealing with his own money as an adult.
Having some degree of financial literacy is a necessity as kids enter the world of adulthood. Turning a blind eye to debt, savings and budgeting can result in some pricey consequences down the road that may take years to recover from. Teaching teenagers about money early on is the best way to get them ahead of the game and prepare them for adult life. Here are a few things that every teen should know about money.
1. ATMs and Pinpad Safety
While using an ATM or pinpad is fairly straightforward, knowing how to use them safely may be less obvious. To prevent theft of personal information and pin numbers, remind your teen to always cover their hand as they enter their pin at a machine or ATM. Make it a habit to take a quick look around to be sure no one is watching before using your banking codes. If the machine looks suspicious or something seems off, use a different machine or bring it to the attention of an associate.
Always keep your pin code a secret. Remember not to store it on your phone or somewhere easily found and don't share with others, even your friends.
2. Credit Cards and Debt
Credit cards can be a blessing or a curse, depending on how you use them. It is vital to explain to your teens that credit is not ‘free money’ to be spent without a second thought. Teach your teen to only use a credit card if they are in an emergency, or if they know they can pay off the balance within the next 30 days. If there is any doubt and its not an emergency – don’t spend!
Careless use of credit cards can easily lead a teen down the dark, slippery slope known as debt – and once you’re in debt, it can be a struggle to get out again. This is because of one thing: Interest. If you can’t pay off your credit card balance, interest starts to accumulate, sometimes by as much as 22%! Before your teen gets their first card, make sure they are aware of the dangers of debt. A good way to start with cards is to get a debit card. This way they practice spending with money, but it is real money - not borrowed.
3. Saving and Budgeting
Spending money wisely can be a difficult feat for an adolescent. With so many wants and so little resources, money seems to just fly out of their hands! Trying to teach your teenager how to budget properly and put away money for a rainy day may elicit an eye-roll, however it couldn't be a more important lesson. Help them work out a spending budget for the month, and put the remaining money into a savings account. Consistency is key!