Get a Job
WHEN I WAS GROWING up, my mother thought the best way to relieve my boredom during summer vacations was to get a job. She was a valued employee at a local business and she knew the firm was hiring.
I asked if part of the job was to calculate change for customers when they made a purchase. That terrified me. My mother said she wasn���t sure, but that I���d learn to do it if it was required. The thrill of having money to spend outweighed my fear of making change. I took the job and survived the cash register.
That got me thinking about today���s teens taking their first jobs. I read that jobs are plentiful this summer, and there may even be a signing bonus. If they get a job in retail, kids won���t have to calculate change, either. The computer will do it for them.
On top of that, they���ll have other advantages. For starters, they���re unlikely to owe federal income taxes on their summer wages. A dependent child can earn up to $12,950��and pay no federal income taxes in 2022. Social Security and Medicare taxes must typically be paid, however. Seeing those deductions will teach teens a little about the taxes all workers pay.
Fidelity Investments reports that teens know they need to have financial goals. Saving comes up as teens��� No. 2 goal���right after getting a well-paying job. Yet less than half of teens have any savings at all, according to Fidelity���s research.
When saving, a teen might be tempted to take the TikTok money challenge, which involves saving cash in a liquor bottle. The TikTok challenge offers the sense of community and accountability that financial planners say can encourage saving. The idea: Don���t crack open the bottle until it���s full. The liquor bottle challenge, however, does nothing to address inflation. That���s another concept kids need to understand today���that a stash of cash will lose value as consumer prices rise.
With help and encouragement from a parent, relative or family friend, teens might stash some of their summer earnings in an investment account. The gold standard would be a Roth IRA. A Roth account could grow tax-free for life���provided, of course, that they don���t withdraw their earnings before age 59��.
They���d likely need help picking suitable investments. Some good candidates include stock index funds or individual stocks that have a record of paying steadily rising dividends. For non-Roth money, risk-averse teens might try Series I savings bonds.
Teaching children to invest can give them a huge headstart in life. Fidelity makes this easy by offering a youth account for kids ages 13 to 17. It encourages the teen to save, invest and spend with parental oversight, providing hands-on experience along the way. To participate, a parent must be a Fidelity account holder.
As an added incentive for kids, the Fidelity account includes a free debit card with no fees or required minimum balance. There���s also a mobile app linked to Venmo and PayPal. I love the site's education component.
Since only 27% of young adults understand basic financial concepts���and less than a fifth of teachers say they feel competent to teach personal finance���a financial account like this could be a valuable addition to their education. I also wonder whether some parents might gain a wealth of information���pun intended���as they work with their children.
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