You teen has landed their first job and it’s a fantastic opportunity to further the ‘pocket money’ talks. Finance writer Michelle Bowes talks us through five important money moments when your teen starts their first job.
Everyone talks about how expensive babies are – clearly they’ve never had a tween or teen!
Aside from food and clothing as they grow (and grow, and grow!), at about age 10 they become a lot more conscious of the world around them. This is when trends and peer influence really start to kick in.
Suddenly it’s no longer about having a pair of sneakers; they have to be the right type of sneakers. And don’t get me started on mobile phones and data plans.
You might be looking forward to the day your teen is able to land their very first job and start earning some cash of their own to cover some of these costs. If you’re already there, CONGRATULATIONS!
Skills for life
It’s important to train your teen in the foundations of money management right from the start. It’s an important skill they can use throughout their life as their finances get more complicated. And hopefully, it will mean the Bank of Mum and Dad can close well before they move into their 20s and beyond!
You might want your teen to begin picking up the cost of a few of their own expenses. Or you’d just like to help them establish good money habits. Here are five things you can do to help them get off on the right foot (in the right sneakers!) with money.
1. Help them open some bank accounts
Once they get their first job, they’ll most likely need a transaction account for their pay to banked. The smart money is on opening a savings account at the same time.
Depending on the requirements of each individual bank, your teen may need your signature to open their accounts. But even if they don’t, they’ll benefit from your guidance around which bank accounts to choose.
An important consideration will be the account fees charged — look for a low or no fee account.
To get cash out or make tap and go purchases, they’ll also need a debit card. If they’ll be doing any online shopping it’ll be easier if it’s a Visa or Mastercard debit card. In addition, a bank with a good app that lets them track their spending will help them to learn good money habits.
When it comes to a savings account, a high rate of interest is pretty hard to come by these days. So look for the best rate you can find, and note whether it comes with any catches (such as a minimum monthly deposit). Savings accounts that allow them to set up sub-accounts or savings goals can also be useful if they want to save up for different things.
2. Help them apply for a tax file number
If they earn less than $18,200 a year your teen won’t have to pay tax, but their employer may still require them to have a tax file number so that they don’t have to withhold tax from their pay.
Even if they don’t need one yet, it’s something they’ll need in the future when their earnings increase. Once you have a tax file number, it’s yours for life so it’s worth getting it out of the way now.
Applying for a tax file number is free, quick and pretty easy. Find out more about how to do it on the Australian Taxation Office website.
3. Teach them to check their pay
Given the list of Australian companies that have been found to have underpaid their workers in recent years (many of them retailers with a younger workforce), it’s always a good idea for your teen to check their pay. They shouldn’t rely on their employer to get it right.
Whether it’s in a diary or an app, they should note the hours they work, especially if their shifts differ from week to week. This way, they can check their payslip or bank statement against their hours to make sure they’re receiving the right amount of money.
And if they want to make sure they’re being employed at the correct rate of pay and not being taken advantage of, they can check the minimum pay rates on the Australian Government’s Fair Work website.
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4. Talk about how they’ll spend (and save) their money
Now they have their first job, if there are things you want your teen to start paying for, let them know. Some examples might include their mobile phone bill, or lunches from the school tuck shop.
You might even want to set limits on how much you’re willing to contribute for certain items. For example, perhaps you’ll pay up to $100 for new sneakers, but if they want a more expensive brand they’ll have to pay the rest themselves.
While you’re talking about your expectations around expenses, also have a chat to them about saving. Are there any large items you could encourage them to save up for? A new mobile phone? A car? A schoolies trip or gap year travel?
Having a longer-term savings goal is a great way for your teen to learn the discipline and reward that comes with saving for something big.
5. Help them create a budget
Now they’ve got an income and you’ve had a chat about expenses and savings goals, help them create a simple budget. This should list their monthly earnings against their monthly expenses. There are some apps that can help with this, but a simple spreadsheet or even a pen and paper version is just as good.
Once they’ve got a budget, they’ll be able to see how much spare money they’ll have each month and work out how much they’d like to spend versus what they’ll save towards their longer-term goals.