Make your teen's first paycheck a teachable moment

July 27, 2020

For teens who land their first job, that initial paycheck is quite a thrill. Or maybe not. What happened to all the money I earned? What’s FICA? Look at how much tax I paid!

It’s the perfect opportunity for you to expand their financial education—and we’re ready to help.

Explain the reality of taxes. If your teen knows someone who serves in the military or receives federal fuel assistance, it will be easy for them to understand that these government expenses are largely paid out of taxes. You’ll also want to explain the difference between income tax (which may be refunded when your teen files a year-end tax return) and the nonrefundable payroll tax assessed under the Federal Insurance Contributions Act (FICA), which helps finance Social Security and Medicare.

Bring in your teen to open savings and checking accounts with us. You might ask your child to investigate offerings from other kinds of financial institutions ahead of time, so you can help him or her compare features and fees with those at our credit union. We’ll be glad to do a little coaching too, if you wish, by:

• Explaining the how’s and why’s of debit cards, credit cards, and ATMs.
• Suggesting ways to keep track of spending to avoid overdrafts.
• Show how to check account balances, view recent transactions, and make transfers through our online banking service.

Encourage the habit of saving. It’s great if you can motivate your teen to start saving right from the first paycheck. Their first objective ought to be something tangible—maybe an iPad or even the down payment on a car—so success will cement the habit. We’ll help by working with your youngster to determine an affordable savings contribution, and arranging to have it transferred regularly from checking to savings.

With a little effort, you can help make their first paycheck a ticket to financial independence in the future.