Teaching Your Teen Money Management

July 18th, 2011, by

Q: My daughter is working for the first time this summer. How should I help her manage her money?

A: I can totally identify. My 16-year-old daughter started her first job this summer, working at a summer camp. I’m so proud of her. She hasn’t gotten her first paycheck yet, but we have had numerous conversations about what she should do with her summer salary.

For example, we’ve told our daughter we expect her to tithe or give a tenth of her income to our church. That’s a family value we hold, and we are teaching it to our children. If this is something your family believes in, teach it to your children at a young age, so it won’t be as hard later to tithe when they are making more money.

Talk to your daughter about saving part of her pay for both short-term and long-term things she may need and want. Now is the time to get her into the habit of saving something from every dollar she earns or is given.

Once she gets paid, help her create a budget.

Talk about taxes. Will she need to have money taken out of her pay for taxes? The Internal Revenue Service provides tips for students starting a summer job. Here are a few of them:

• When you first start a new job, you must fill out a Form W-4, Employee’s Withholding Allowance Certificate. This form is used by employers to determine the amount of tax that will be withheld from your paycheck. If you have multiple summer jobs, make sure all your employers are withholding an adequate amount of taxes to cover your total income tax liability. To make sure your withholding is correct, use the IRS Withholding Calculator.

• Whether you are working as a waiter or a camp counselor, you may receive tips as part of your summer income. All tips you receive are taxable income and are therefore subject to federal income tax.

• Many students do odd jobs over the summer to make extra cash. Earnings you receive from self-employment—including jobs like baby-sitting and lawn mowing—are subject to income tax.

It’s your job to teach your children good money management. You don’t have to dictate how they spend or that they save every penny, but you should be providing guidance.

Last modified: July 25, 2011 at 12:13 pm