A summer job can kickstart a teen’s financial future and unlock doors for years to come—if they make smart financial moves.
Summer jobs are a great way to teach teens responsibility, build their future resumes, and give them money to spend on the things they want. But with a bit more work, these jobs can lay the foundation for a great financial future no matter where their careers take them. Let’s explore how you can help the teenagers in your life make smart money moves now that they’ll benefit from for years to come.
What kind of account can my teen open?
Most teenagers will have two types of accounts available to them, each with their own benefits and use cases.
Youth Checking Account:
Like a regular checking account, a youth checking account allows for direct deposit and generally has a debit card attached to allow for daily purchases. These accounts usually require a parent or guardian to have joint ownership. Remember to look for an account that doesn’t have monthly service charges or minimum balance requirements.
Youth Savings Account:
As with the checking accounts, youth savings accounts are very similar to standard savings accounts. These accounts also usually need an adult associated with them. Look for an one with a great interest rate so your teen can start enjoying the benefits of compound interest and watch their savings grow.
A smart financial strategy will leverage both of these account types, along with a few other tricks.
What should my teen do with their account(s)?
There are a few simple steps teenagers can take to set themselves up for success.
First, help your teen create a budget. This can be done on paper, using a spreadsheet, or even via an app. Sit down and talk about their short and long term goals and decide together how much they should put in their savings account every month versus what should stay in checking.
Once you’ve made that determination, help them set up a recurring deposit into their savings account. If they’re planning to work once the school year begins you can keep the automated transfer in place. If not, help them review their accounts at least once a month to determine if they can transfer windfalls like birthday money into the savings account to keep their new nest egg growing.
To help them manage their checking account and create habits that’ll serve them as they grow, consider using the envelope method—a trick that used to involve putting actual cash in envelopes and now often consists of a line item in a spreadsheet or a category in an app.
Encourage your teen to earmark every dollar in their checking account, and once the money in that “envelope” is gone, to stop spending in that category until their next paycheck. For example, this might look like a $20 a month contribution to the family cell phone bill, $50 a month toward eating out with friends, and $40 for experiences like seeing a movie or going to a live show. This exercise will help your new worker practice long-term thinking and self-control—skills that will make budgeting and saving much easier as they grow older.
Get started today
There’s no time like the present to get someone set up for financial success. First Entertainment Credit Union can help you and your teen pick the right account(s) and start building savings today. Contact us today to get started.
