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Teaching
teens the basics of money
By
Lucy LazaronyBankrate.com
Teens with summer jobs and plenty of disposable income:
The retailers love them, parents worry about them. Here are six
suggestions for helping your teen enjoy the fruits of the labor
and still have some cash leftover.
Do the math
Begin by figuring "take-home pay" for the entire summer.
Make sure your teen is aware of how deductions will affect actual
income. teenagers should realize what their net income for the
summer will be so they can develop a realistic budget.
Plan for the future
Discuss a savings objective to reach by the end of
summer. The first component of a budget plan is savings. If your
teen can identify a savings objective – to have $500 by summer's
end or enough money to pay for a football uniform or to save $1,000
toward college – it's much easier to find ways to save. It
also builds self-confidence and belief in money management if a
financial goal is reached. Encourage your teen to "pay yourself
first" by putting aside a portion of every paycheck in an interest-bearing
savings account.
Plan for the present
Sit down and develop a spending plan. Encourage your
teen to create a spending plan once their summer income, minus savings,
is determined. It's important to emphasize that a spending plan
should be flexible and can be revised as goals change.
Sort things out
Help your teen identify "needs" and "wants." An important
step in every spending plan is to identify "needs" (transportation
to work, school supplies etc.) and "wants" (the latest footwear,
an expensive gift for a friend). The "needs" comprise your child's
unavoidable expenses, while the "wants" should be treated as rewards
for taking on the responsibility of a summer job.
Practice for bigger things
Make the financial world accessible. Young adults
should familiarize themselves with the financial sections of their
local newspapers as a start. Encourage them to create an imaginary
"stock portfolio" of companies that make products they like. Track
the results together.
Remember Uncle Sam
If your teen works, Uncle Sam will most likely be
involved. If you or someone else claims your teen as a dependent
and the teen earns more than $4,400 or the combination of earned
and unearned income is more than that, a tax return must be filed.
The good news is that if annual earnings are $4,400 or less (likely
at that age) a refund may be coming. Finally remind your teen that
a refund is money that he or she worked for, not a present from
the government. Encourage them to save a portion of it or to have
it directly deposited into a bank account.
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