Kids and Money: Smart Money Tips for Teens with Summer Jobs

BIRMINGHAM, Mich.­—So, your teenager has just landed her first job this summer. That’s a cause for celebration. Summer jobs offer youth the opportunity to learn about responsibility and the confidence that comes with self-reliance. A paycheck can provide young people an opportunity for their first lessons in money management.

Teenagers, and even younger kids, can understand money basics like how to balance a checkbook, how to write a check, and even the basics of planning a budget based on needs and wants. When a teenager gets his or her first job, that’s the best time to build up a savings account for future needs such as buying and maintaining a car, and getting a first apartment.

Here are a few smart things teens can do when they start earning their first paychecks:

· Save it. You’re never too young to start saving. From the very first birthday card with cash in it, making a habit of saving a percentage is a good practice that can foster lifelong financial responsibility.

· Make a budget. Even though your first budget will be small, learning how to make and stick to a realistic spending and saving plan is a skill that will serve well for the rest of your life. One thing I tell kids all the time is: Always pay yourself first, and put money in savings before paying for any other expenses.

· Take advantage of not paying rent. If you’re a teenager who has just landed that first summer job, the very first budget plan should include a significant percentage of your paychecks earmarked for your savings account. Never again will you enjoy rent-free living, so take advantage of it now so you have built up an emergency savings when you leave home. Now is the time to consider saving at least half of your paycheck.

· But also have some fun. Learning to distinguish between a need (paying for gas and car insurance, for example) and a want (going to see a movie or buying that shirt that you don’t really need, but you really want) is an important start when you are deciding how to make a budget. Be sure to include some money to spend on “wants” as well as needs. If you don’t, you will feel deprived and more likely to ignore your budget and overspend.

· Start the giving habit. It’s also never too early to start giving to charities and causes you support. Include in your budget a percentage of your earnings to go to nonprofits, your church or other causes you support.

· Not all debt is bad. I would never encourage a young person to run up a bunch of credit card debt, but borrowing for college tuition is fine. Eventually, borrowing for a car is also an example of good debt, as long as the payment fits into a sensible budget.

About the author: Pamela Audette is a senior vice president at Bank of Birmingham, a full-service community bank in Birmingham, Michigan, founded in 2006, to provide competitively priced banking services and products that meet the needs of individuals and businesses by listening, advocating and delivering banking solutions. More information can be found at www.bankofbirmingham.com