by Ashley
Big news around here – my teenagers got their first “real” jobs!! They were both hired as seasonal workers at the Pumpkin Patch. It’s only 5 weekends in the month of October, but it’s a perfect first entry-point to the workforce.
Caveat: I say “real” job with quotations because they have worked for me (for my business), and also done odd jobs like pet-sitting and babysitting. But this is the first W2 position in their lives.
I love that it’s short-term because we have a pretty packed schedule in-between all the new High School events (football games! dances!) and their sports schedules. It’s weekends-only, and only for 5 weeks. Even so, this is “big money” for them! The minimum wage in Arizona is $15.15/hour and, boy, do they each have dollar signs in their eyes, eagerly awaiting the Pumpkin Patch opening!
Suddenly, I realized we’ve entered a whole new phase of parenting: teaching our kids what to do with money they’ve earned themselves. This raises all sorts of questions for me and I’d love to solicit advice from those of you who have gone before. ?
How much should they save?
Should I require them to save a certain percentage, or let them have free rein of how they save or spend their money?
Should they invest in their Roth IRAs? How much?
They already have Roth IRA accounts since they work for me, and I ensure deposits are made into their accounts from their earnings. But now that they have a W2 job…should I also encourage/require they invest some of those funds as well? What percentage?
Should they have a “giving” requirement?
When I was growing up, I remember my parents getting me a piggy bank with 3 distinct categories: saving, tithing, and spending. From an early age, I was encouraged (or…required), to put a portion of my money aside for tithing.
I do think there’s a real benefit of giving back to others. Even if it’s not tithing to a church, I’ve encouraged the girls to make donations in the past when they’ve received an influx of money, like for a birthday or Christmas. They’ve donated to our local animal shelter, which has an online Amazon wish list that lets you pick specific items that you want to give to the pets there. So we could do something like that with a small percentage of their money. What do you think?
What’s the best savings account(s) for kids?
Right now, we’ve just been doing Greenlight cards for the kids (<referral link. If you sign up, we each get some free money!). Through Greenlight, I can designate a portion of funds be put into spending versus savings, and I like that it gives me the ability as a parent to approve (or decline) purchases. For instance, most of the girls’ money stays in savings and they cannot move it to spending without permission.
It has initiated great conversations about what is appropriate (or not) for spending. Like the one time the girls decided to make each other gift baskets (for no reason – not a birthday or anything) and set a limit of $60/basket!
I love the thought and consideration since they were doing it for each other. But $60/basket is insane. Their allowance is only $25/month, so we’re talking over 2 months’ worth of allowance going into a completely random just-for-fun gift. We had a big discussion about how I loved where their hearts were, but the value of the gift was out of proportion with their budgets.
Anyway….I’ve been thinking I need to open up traditional savings and checking accounts for the girls and to get “normal” debit cards for them at some point. Is now the time? If so, what are the best accounts for teens? I want something that’s easy to open and access, and having some built-in parental controls would be great. I have accounts at Bank of America and Capital One, so if one of them is good for teens, it’d be a bonus that I already bank there.
How much do I let them screw up?
Back to the gift basket story…. part of me thinks this is a good time to let the kids make some questionable purchases. The stakes are low right now. They don’t have any bills they have to pay.
Is blowing $100 on something ridiculous actually a great way to learn that blowing $100 on something ridiculous doesn’t feel great afterward? Where’s the line between teaching good financial habits and controlling their money so much that they never learn to manage it themselves?
Do you suggest any good resources for teens to learn financial literacy?
Obviously, I’m a bit obsessed with money (as evidenced by blogging at a get-out-of-debt blog for a decade now, lol). My kids are less so. They’re not oblivious to it – we have lots of financial conversations. But I think they’re now at a life juncture where they could stand to learn more.
Do you have any books, podcasts, YouTube channels or other resources you’d recommend specifically for a teenager earning their first paycheck? Not something stuffy “Elder Millenials” (as they call me) would be into, but something teens would actually find interesting?
Honestly, I will take all the help I can get! We’re soon going to be getting into all kinds of financial conversations with the kids. When they’re able to drive a whole new world will open.
I’d love your advice and input while we’re on the front end of this whole kids-working-and-earning-money adventure. If you’ve already raised teenagers through this stage, what worked? What didn’t? What do you wish you had done differently? And if you have teens now, how are you handling their money?
I’m taking notes.
Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Early 40s, married mother of twins, and working in academia. Currently working toward financial independence with the goal of (hopefully!) retiring early at 50.
Honestly? I think kids who are motivated to go out and earn money have also earned the right to be in control of their earnings. Any Mistakes will have natural consequences. Mandatory giving is an oxymoron. This is a very low stakes way to let your kids figure out some stuff on their own.
You’re right – the stakes will never be lower than right now!
I remember the shock of my very first “real” paycheck, when I saw all the taxes coming out. I don’t remember what big plans I had for my money, but they definitely had to be adjusted once I saw what I could actually put in my bank account.
As long as your daughters’ employer does proper payroll, with tax withholding, that may be lesson enough.
Yessss! The shock of taxes is a lot!
I have no kids so take this with a grain of salt….
Rather than tell them how to split up their money. I would think about what you expect them to pay for in the next 5-7 years. And make them aware or your expectations so they can save appropriately. Are you going to cover their car insurance? Expect them to fund a certain amount for their first car? Will they need to cover a certain amount of schooling, extra curriculars, or spending money?
These are all good things to think through!
I’m a fan of the parent matching Roth IRA contributions, either to the max total (kid’s earned income or IRS max, whichever lower) or however much as the parent is willing to match. If you want to set a percentage, you could do 15% because that’s often recommended for adults to put in retirement. Or, you could take stock of kid’s expected expenses (required + discretionary) and set a Roth contribution expectation based on that.
Personally would recommend Fidelity for both youth Roth IRA and the youth brokerage account, which can be invested in money market to act as a high yield savings account. If they invest in securities in the brokerage, you might need to keep kiddie tax in mind.
Oh, good idea about Fidelity brokerage for money market accounts!
Teaching them (requiring) that they have to save *something* because it’s the best habit to get into. $5 a paycheck? $10? Just the routine of setting a little aside will help them going forward. Saving requires discipline, and with any young person, time is the best advantage they have. When they are older and earning an actual salary, having years of discipline in putting some money in savings (whether that’s a Roth, HYSA, whatever), will be an amazing foundation.
Good point! Especially with time being on their side right now for compounding interest, etc.
Honestly, we didn’t really do much with our kids and they turned out fine. The main thing I think we did was set a good example on spending. Even though we can afford it, we don’t buy new cars, don’t spend frivolously, have never ordered Uber eats to deliver food etc. They see their friends with expensive spending habits and parents and were never called to be like that. They make fun of the girls that have 12 pairs of Lululemon tights. Thank goodness! They just save and spend when needed, now for college. Just setting a good example is the best thing you can do in my opinion.
oh my gosh, you’re lucky! My daughters are WAY bigger shoppers than I have ever been (even when I was a teen, I was always very frugal). They would buy all the name brand everything if I let them. That and other poor spending habits like a daily Starbucks. I NEVER (super rarely) get Starbucks! I honestly prefer brewing my own coffee at home! It’s better and cheaper! But when they’re at their Dad’s house (which is walking distance to a Starbucks), they literally go every single day after school. They can easily blow their entire month’s allowance between just a couple of trips to Starby’s and they honestly don’t seem to even care! It’s a real problem for me!