Savings is a Good Habit-So Start Teaching Early

As summer rolls around, over a million young Americans will put aside their laptops and school books to clock into a summer job.

However, the break from school doesn't mean the learning has to stop. Having a job is a great opportunity for teens to learn something valuable that isn't taught in school--how to handle money and build their savings for the future.

Lifelong Savings Lessons from a Summer Job

The following are seven things your teens can gain from a summer job, other than gas money:

1. Understanding taxes. The thrill of a first paycheck is often blunted when a young person sees that some of the money they've earned has disappeared into tax withholding before they've even touched it. This is a valuable introduction to the concept that everyone contributes to the community and world around them just as they work to achieve their own priorities. Chances are that teenagers employed only in the summer can get most of those payroll deductions back at tax time--which is also an opportunity to teach about preparing for and filing their first tax returns.
2. Responsibility for the future. Discuss what you expect your children to contribute to their education costs. This sends an important message: Although previously everything may have been provided for them, now they are getting to the age where they have to start contributing financially to their own futures.
3. Deferred gratification. Education isn't the only future need teens have in mind. Buying an iPhone or perhaps even a car may be goals they hope to reach. This is a good example of how spending less week to week can mean doing more in the long run.
4. Juggling multiple priorities. Since there will always be multiple priorities competing for a person's paycheck, use this opportunity to teach your teen how to select among them, budget to meet them, and set aside separate portions of each paycheck for each item on the budget.
5. Advance planning. Budgeting requires advance planning--not just how to save money, but how to make it last. Students going off to college often run out of spending money well before the end of the first semester. Help your teens prepare by showing them how to spread out their pocket money into a weekly or monthly self-allowance.
6. Maintaining a bank account. Since a teen will need a place to deposit paychecks, use this as an opportunity to teach about bank rates and about the differences between checking, savings, and money market accounts. Show them how to compare features in order to select the best savings account. Savings account rates can vary significantly depending on the account and bank characteristics, and some banks offer special bank accounts for students. Then show your teen how to keep basic personal records and check them against the bank's statements.
7. Appreciation of work. According to the Bureau of Labor Statistics, the employment rate among Americans age 16 to 24 was the lowest on record as of July 2009, as a consequence of the prolonged recession. With a slow economic recovery, don't expect that to be much better for a few years. Therefore, if your teens have jobs, give them positive reinforcement in the form of encouragement. Let them know you are proud of them for working, and as the summer progresses, help them recognize how much their savings are building. In the meantime, make sure they get to keep a portion of every paycheck for personal use. After all, that feeling of having even a little money in the pocket can be the most tangible, direct reward for working.

As summer rolls around, over a million young Americans will put aside their laptops and school books to clock into a summer job.

However, the break from school doesn't mean the learning has to stop. Having a job is a great opportunity for teens to learn something valuable that isn't taught in school--how to handle money and build their savings for the future.

Lifelong Savings Lessons from a Summer Job

The following are seven things your teens can gain from a summer job, other than gas money:

1. Understanding taxes. The thrill of a first paycheck is often blunted when a young person sees that some of the money they've earned has disappeared into tax withholding before they've even touched it. This is a valuable introduction to the concept that everyone contributes to the community and world around them just as they work to achieve their own priorities. Chances are that teenagers employed only in the summer can get most of those payroll deductions back at tax time--which is also an opportunity to teach about preparing for and filing their first tax returns.
2. Responsibility for the future. Discuss what you expect your children to contribute to their education costs. This sends an important message: Although previously everything may have been provided for them, now they are getting to the age where they have to start contributing financially to their own futures.
3. Deferred gratification. Education isn't the only future need teens have in mind. Buying an iPhone or perhaps even a car may be goals they hope to reach. This is a good example of how spending less week to week can mean doing more in the long run.
4. Juggling multiple priorities. Since there will always be multiple priorities competing for a person's paycheck, use this opportunity to teach your teen how to select among them, budget to meet them, and set aside separate portions of each paycheck for each item on the budget.
5. Advance planning. Budgeting requires advance planning--not just how to save money, but how to make it last. Students going off to college often run out of spending money well before the end of the first semester. Help your teens prepare by showing them how to spread out their pocket money into a weekly or monthly self-allowance.
6. Maintaining a bank account. Since a teen will need a place to deposit paychecks, use this as an opportunity to teach about bank rates and about the differences between checking, savings, and money market accounts. Show them how to compare features in order to select the best savings account. Savings account rates can vary significantly depending on the account and bank characteristics, and some banks offer special bank accounts for students. Then show your teen how to keep basic personal records and check them against the bank's statements.
7. Appreciation of work. According to the Bureau of Labor Statistics, the employment rate among Americans age 16 to 24 was the lowest on record as of July 2009, as a consequence of the prolonged recession. With a slow economic recovery, don't expect that to be much better for a few years. Therefore, if your teens have jobs, give them positive reinforcement in the form of encouragement. Let them know you are proud of them for working, and as the summer progresses, help them recognize how much their savings are building. In the meantime, make sure they get to keep a portion of every paycheck for personal use. After all, that feeling of having even a little money in the pocket can be the most tangible, direct reward for working.