Paycheck primer
Teen's first
summer job is a great time for parents to teach basic money
management
Staten Island Advance - April 26, 2005
Whether it's as a camp counselor, clerk, lifeguard
or tutor, the summer job remains a rite of passage for many
teenagers, a time when the lazy, hazy, crazy days of summer become a
thing of the past and working for a dollar begins to take
precedence.
For mom and dad, a teen's summer job should also be viewed as a
teaching opportunity -- a way to introduce the subject of finance
and instill sound money skills that can last a lifetime.
"Most teens sort of look upon mom or dad as their personal ATM
machine. But all that changes when they start to get their own
paycheck in their hands. Now, suddenly, they've got the power of the
dollar, and they need to know how to handle it," said New Dorp
financial planner Kay Pesile, an adjunct professor of finance at the
College of Staten Island.
Parents need to be in-home instructors. They must encourage teens to
set goals and save toward those goals. Some, like Port Richmond High
School sophomore Idris Olayokun, 16, need little coaxing.
She used her first summer wages last year to establish her own
savings account. "I paid myself an allowance, and put the rest in
the bank so that my money can earn interest and grow, and when I
really need it, I know it will be there," she said.
But most profit greatly from the guidance of someone older and
wiser.
Tiara Linwood, 15, a freshman at Curtis High School, said she's
helping to save for her college tuition by depositing a portion of
her summer wages into a joint savings account she has with her mom,
Linda.
"When I started to work my mom told me about the joint savings
account she had my name on. I'm real happy she opened it for me, and
that I can help pay for college expenses by saving some money now,"
she said.
Joanna Quinniones, 16, of Graniteville, a New Dorp High School
junior, said she plans to deposit a portion of her summer earnings
as a counselor in the savings account her mom, Zerina, set up for
her when she was born. She said her mother will match every dollar
she saves.
Last summer she worked at United Activities Unlimited's PS 18 Beacon
Center in West Brighton, through the city's Summer Youth Employment
Program. She is hoping to be similarly employed this year.
"Unfortunately, saving your money is a skill a lot of kids my age
haven't learned, or learn too late," she said.
Ms. Pesile agrees. She said she sees many high school and college
students who don't know how to create a budget or how to save. "It
has to start in the home," she said.
Parents can help by talking to teens about saving for the future and
about "needs" and "wants," and setting long-term and short-term
financial goals, said Ms. Pesile. "Parents need to take an interest,
or their children just won't get the message. Too many of them are
not getting the message," she said.
Teens should be encouraged to develop a budget and save a portion of
each paycheck, experts say. Some suggest saving a minimum of 10
percent, while others suggest a higher amount, as much as a quarter
to a third of each paycheck.
Gina Laine, marketing manager for Richmond County Savings Bank, said
teens need to manage their money for another reason: To establish a
solid credit rating in the future.
"Savings accounts, checking accounts, any other investments -- these
are the things that will be looked at when you go to establish a
line of credit one day, whether it's to open a credit card account,
buy a car, get an apartment or finance a large purchase. Once you
establish a credit rating, it follows you as you get older," she
said.
Young people today have options: They can deposit their savings in a
traditional savings account in a bank, a money-market account or a
short-term certificate of deposit, where they'll also learn about
interest and compounding, experts say. These days, many banks offer
student savings accounts to teens under 18. At Richmond County
Savings Bank, for example, young people from age 7 to 18 are
eligible to open a passbook "Kids Savings Account" which allows them
to track their deposit from week-to-week and maintain a minimum
balance.
Ms. Pesile advises teens to divide their summer take-home salary,
after taxes, into four categories. She recommends setting aside 25
percent for savings; 25 percent toward long-term purchases, such as
cars or electronic equipment; 25 percent for immediate needs, such
as food, carfare, entertainment and personal care, and 25 percent
toward household expenses.
Contributing toward household and living expenses might seem
unnecessary, but it helps teens learn what it costs for what they
often take for granted at home, such as groceries, utilities,
insurance and rent. "And besides, it's always great to try to give a
little something back to mom and dad," she said.
Ms. Pesile said teens are also not too young to consider investing
in stocks or mutual funds. She was 15 years old, she recalled, when
she invested a portion of her summer wages in a mutual fund.
Curtis High School sophomore Chris Morales, 16, of West Brighton,
made his first venture into the stock market with money he earned
last summer as a counselor at the PS 18 Beacon Center. Morales, who
runs track, bought two shares of stock in the Nike Corp. "I looked
around at my teammates, and we all had running shoes, and I figured
everyone in sports wears some sort of athletic shoe, so that's how I
picked Nike," he explained.
At 18, Lee McDonald, a senior at Curtis, is well on his way to
becoming financially literate. He gives his mom a portion of his
summer paycheck "to help her out with the house." In addition to
depositing a portion of his paycheck into a savings account,
McDonald has also has established a checking account. He writes
checks to help pay expenses for his car and cell phone.
He said he hopes his savings and checking account will help him
establish a credit record. If you don't have a bank account or
checking account, you can't get any credit, he said. "No credit, no
car, no apartment. That's just how it is," he said.
By
Diane Lore
Reprinted here with permission from the
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