Talking with your teen about money can go smoother if you keep the conversation age appropriate. The conversation starters and activities here can help you find the words.
Conversations about earning
- Discuss the difference between gross pay (before taxes are taken out) and net pay (the amount you take home)
- Explain the W-4 form, which you fill out when starting a job, determines the amount of taxes taken out of a paycheck
- Explain tax brackets vary depending on how much you earn
- Discuss what taxes pay for, including schools, road maintenance and medical help for the elderly
- Wall through your teen's paycheck together, item by item, to figure out what's being deducted and where the money goes
Activities about earning
- What's on a pay stub?
What's on a pay stub?
Show your teen how deductions make the difference between wages and take-home pay.
Show your teenager the sample pay stub to explore how the paycheck amount is calculated and what the entries mean. For many teenagers, their first job brings their first paycheck, and the terms and the amounts on the pay stub aren't always easy to understand. Income tax and employee benefit programs can seem like abstract concepts. Looking at each item and seeing it in dollars and cents can help your teen understand the real-world effect of taxes and deductions on the amount he or she can spend.
Print a copy of the sample pay stub form (download above) for your teenager and get a copy of their pay stub. If your teen doesn't have a pay statement yet, decide if you feel comfortable showing your own pay stub as an example.
What to do
With your teenager, go over all the entries and deductions on the sample pay stub, pointing out each item on their pay statement as you go along.
This activity shows your teenager the difference between gross pay and net pay. Your teen might be able to tell you what he or she earns as an hourly or yearly amount – usually that's the gross pay. When your teen sees how gross pay is deducted by taxes and deductions to the "take-home" pay amount, he or she can think more realistically about how much money is available for spending and saving.
Things to talk about
Based on what your teen discovers through this activity, consider ways to keep the conversation going. Each part on a pay stub gives you something more to talk about. For example, together you could:
- Look at the deductions on your teen's W-4 form to see how much is being withheld
- Talk about how your teenager can use the information on take-home pay. For example, your child could think abut a realistic budget for ongoing expenses like a cellphone, or start to save up for something he or she wants, like a trip or a car
- Talk about the W-2 your teen receives at tax time, and how it's used to file a tax return
- Review any employee benefit programs your teenager is eligible for at work, and talk about how some of those benefits could reduce taxable income and reduce taxes at the end of the year
- Family members' jobs
Family members' jobs
Research and compare the jobs held by family members and what education and training it took to get there.
Your teenager can use this job chart - or create his or her own version – to explore the jobs family members or adults in their lives hold or have held. It's a fun way to think about how adults' career choices have influenced their lives and it may help your teen identify things he or she wants and doesn't want in a career.
Print one copy of the job chart for each adult your teenager will talk to.
What to do
Help your teenager ask the questions and fill in the information about family members and their jobs.
Support your teen in comparing and contrasting different jobs. Work together to identify what different jobs have in common – for example, the education level or degree required or the demand for the job in the future. Decide what factors are most important to your teenager and should carry the most weight – for example, talk about whether a job's salary is more or less important than the tasks and activities in a typical day.
This activity can help with one of the key skills teenagers need to develop: knowing how to research different options and compare them. Practicing this skill in an area that's relevant to them – like choosing a potential career – can help teenagers feel more comfortable with the conscious, rational steps involved in making complex decisions.
Things to talk about
Based on what your teenager discovers through the activity, consider ways he or she could follow through. If there are skills your teen would like to develop, brainstorm together – there are many ways to learn and prepare for the working world. For example, together you could:
- Approach the adults on the chart to see if they are willing to share knowledge and advice, or allow your teen to shadow them at work
- Investigate local resources like libraries and afterschool programs
- Explore volunteer opportunities at local nonprofits
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This material is provided for educational and information purposes only. It is not a replacement for the guidance or advice of an accountant, certified advisor or otherwise qualified professional.