Your teen’s first paycheck marks an exciting step toward independence and a great opportunity for financial learning. Even if your teen has made money from odd jobs like babysitting or mowing lawns, getting a regular paycheck from formal employment is a different experience – one that comes with new routines, paperwork, and financial responsibilities.

As a parent, you play a key role in helping your teen set up the right systems, understand what to expect, and make smart choices with their money. Here are some ways you can support your teen as they reach this milestone.

1. Help them set up a safe place for their money

Most employers pay through direct deposit, which means a paycheck goes straight into a bank account. If your teen doesn’t already have checking and savings accounts, this is a good opportunity to open them together. Once the account is set up, help your teen learn how to log in, check their balance, and confirm that deposits have gone through. They may also want to sign up for alerts – such as low balance warnings, deposit notifications, or large purchase alerts – so they can stay informed without needing to check the app constantly.

This is also a good moment to talk about the importance of online security and protecting your personal and financial information. Walk through how to keep their account information secure, choose strong passwords, and recognize common phishing scams that may come through email or text.

2. Set expectations about their actual paycheck amount

Your teen might be surprised – and a little disappointed – when their first paycheck is smaller than expected. That’s because of automatic deductions that come out of every formal paycheck, even for part-time jobs. Explaining these in advance can help avoid confusion or frustration.

When you review their first pay stub together (even if they’re paid by direct deposit, they’ll usually get an electronic statement), point out these common withholdings:

• Federal income tax: A portion of earnings goes to the federal government.
• State and local taxes: These vary depending on where you live.
• Social Security and Medicare (FICA): These required contributions help fund retirement and healthcare for older adults.
• Other benefits: If your teen has opted into any employee benefits, those may be deducted too.

Understanding why their “take-home” pay is lower than their hourly wage can help your teen be more aware of how the working world operates and how to best manage their money. 

3. Plan ahead for Tax Time

If your teen earns enough to receive a W-2 form at the end of the year, they’ll likely need to file a tax return – even if you’re claiming them as a dependent on your own taxes. In many cases, they’ll get money back, especially if they didn’t work year-round and had more taxes withheld than they ultimately owed.

Filing that first return can be confusing, but it’s also a great learning experience. You can support them by:

• Helping them gather necessary documents, like their W-2s and any bank statements
• Using reputable tools or free resources, like IRS Free File or the VITA program.
• Making sure their return reflects that they’re being claimed as a dependent – this affects what they can claim for themselves

Even if they’re only working a few hours a week, tax time is a great chance to introduce big-picture financial habits, like document organization and paying attention to deadlines.

4. Review job benefits and paperwork together

Some jobs may offer benefits like employee discounts, health coverage, or even access to retirement accounts. Teens might be asked to opt in or out, and may need a parent’s help making the right choice. Help them understand what they’re being offered and if there’s an associated cost. Even if the benefits being offered aren’t relevant to them now, knowing how these programs work is part of learning how to evaluate job opportunities in the future.

5. Encourage saving from the start

The milestone of getting a regular paycheck is an ideal time to introduce the idea of budgeting and saving – whether it’s for college, a car, or other long-term goals. Starting even a small savings habit early teaches financial discipline and introduces the concept of compound growth. You can also use this as a moment to discuss needs vs. wants, short-term vs. long-term goals, and how to build financial independence over time. Even a simple mobile banking app or money management tool can help them track their balance and spending and show how their day-to-day decisions affect progress towards longer term goals.

Your teen’s first real paycheck isn’t just about dollars earned – it’s a meaningful step toward adulthood. Helping them open a bank account, understand taxes, track their earnings, and build smart habits early on can help them build a strong financial foundation.

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