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The Financial Lessons Kids Can Learn from Summer Jobs

What will your kid do with all that money she earns this summer? If you’re worried it will be spent frivolously, you could be partly to blame. Perhaps it’s time to give her some lessons on how she can handle money from her summer job.

This year, I watched the staff at a community pool and tennis complex get reenergized with an infusion of high school and college-aged kids as they dove into their respective positions. With a summer job comes new responsibility. And that includes financial lessons that our kids should learn to get a good start on adulthood.

A summer job may be the first opportunity for kids to earn enough money to need to make more critical financial decisions. They may have a vehicle that requires them to be responsible for gas, maintenance and insurance. Older kids may be paying rent and the expenses associated with having their own place. In either instance, here are some lessons that can help them keep their financial house in order.

Taxes – When my daughter saw her first paycheck, she was disappointed. Her employer promised to pay her a certain hourly amount, and she was counting on having all of that to spend. Sorry, kid. Uncle Sam wants his portion, in part, to provide benefits for her later in life.

Telling a child about taxes and payroll deductions is one thing, but sitting down with them to review the deductions on their first paycheck is another. The concept of taxes is easy to convey to your child: Local, state and federal governments provide services that cost money. We all pay compulsory taxes when we earn money to pay for those services. And we’re required to put money away for Social Security and Medicare that we’ll use later in life.

Explain to your kids that they will be required to file a tax return for the current year. At that time, they may have deductions or credits that could result in a tax refund. Showing them tax rate charts can give them a good idea of what they might expect to pay or receive back.

Budgeting — I believe that the basic concept of budgeting is critical to financial success. Teach your kids that budgeting is a tool that strikes a balance between what they earn and what they can spend. Budgeting is all about managing their money, planning and saving for specific future needs.

Saving — The earlier one saves, the greater the opportunity for the money to grow. Teach your kids about short-term and long-term savings. The short-term savings may be paying for unexpected car repairs or more immediate needs or wants. Long-range savings could provide money for a trip, college or even retirement.

Long-term savings may be difficult for a teen to understand. If you can introduce the concept of compound earnings, they may grasp the importance of investing money now for a future that may be 50 years away. A small amount saved now could grow to a small fortune over time.

Auto-Payments — I don’t know of a bank that doesn’t offer auto-withdrawals and auto-payments. A budget should include long-term savings, particularly for retirement. A portion — generally about 10% of earnings — should be automatically directed to a Roth IRA. When part of their paycheck is automatically directed to another account, your child can learn to live within their immediate means and watch the magic of compounding grow their investments.

Spending — I think that the biggest lesson you can teach a child who is earning for the first time is to spend less than they earn. They will have plenty of time to learn about the advantages of borrowing. But for now, learning to prioritize needs and wants can provide the tools they need to succeed financially at any stage of life.

Summer jobs are about much more than just money. Kids can learn the value of time, gain skills and develop lifelong relationships. And when it comes to the finances of a summer job, they may learn to view money as a tool that they can control.

A CFP® professional can help you teach your kids lessons about how best to handle money from their summer jobs. Visit to find a CFP® professional in your area.

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