Teens’ Summer Jobs Can Be An Investment In Their Future

Teens’ Summer Jobs Can Be An Investment In Their Future

Provided by RBC Wealth Management and the Neuman Wealth Management Group

Every year about this time, the race begins. The school year ends and teenagers find themselves scrambling to land summer jobs. It’s always better to start the search sooner rather than later.  Particularly in today’s job environment, with unemployment levels for adults still at a high level, teens should look for every advantage they can find.

Once a teen lands a job, it’s important that he or she is disciplined with their paycheck. Talking with your child about saving and teaching them responsible spending habits could help put them on the fast track to becoming a knowledgeable investor, which can pay dividends down the road. 

For many of these teen workers, minimum wage is standard pay for their part-time or summer jobs – it's their first experience with how much their labor is worth in the marketplace, and it is their first lesson in how much harder it is to earn money than to spend it.

With this spending money comes the major challenge in trying to avoid having your teen spend it all on video games and trips to the mall. Instead, try to get them to think about what they may need the money for down the road, such as college tuition or a down payment on a car. 

Introducing the idea of saving to your teen can sometimes be a difficult one. To start, create a plan that has both a saving and spending component. Decide what percentage of each paycheck will go into a savings vehicle, and an amount that can be used for spending. You can then teach the importance of tracking their contributions and income earned in the account. Seeing how their money can grow will help keep them engaged in the process.

For younger children, you may want to encourage them to save by offering to match all or some of their savings account contributions. As they get older, an option is to introduce them to a Roth IRA. Since investments in the account fluctuate with the performance of stocks and bonds, a Roth IRA provides the potential to generate a greater return than a savings account.

Furthermore, contributions to Roth IRAs are made with after-tax monies, so savings grow tax-free. Roth IRAs also convert investment income, such as dividends, interest and capital gains into tax-free income. This gives your teen the opportunity to learn how their investment grows over time.

When it comes to the more tangible benefits of summer employment, teens are able to hone their abilities to better market themselves in the future. They may be young, but in a couple short years, they can illustrate in college applications the skills they acquired through jobs, such as commitment, leadership, dedication and initiative. With the right experiences, summer jobs can be an investment in their future.

This article is provided by Eric St. Martin, a Senior Financial Associate at RBC Wealth Management in Stillwater, MN, and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice.  For additional information, please visit www.neumanwmgroup.com or call 651-430-5535.

RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC

(02/13)