This was originally published on Monday, May 30, 2017, in the Pacific Daily News. Click here to subscribe to the PDN.
Summer is just around the corner. You may have a teen eager to try out the work force. Summer jobs teach teens how to manage money and what is expected of them once they are ready to start a career.
There are many advantages to working a summer job. Help them understand that there is temptation to buy the latest gadget, game or clothes and that treating yourself every now and then is OK.
But give them the true gift of understanding the value of money.
- Savings account. Find a good starter account, one that does not have many penalties, especially for maintaining a balance below a certain minimum. Many banks offer bank accounts for kids of all ages. Usually credit unions charge a lower fee and pay more interest.
- Basic money management skills. Technology has made it easier to keep up with your budget. There are apps that kids can download right onto their smartphones.
- Investing. Get kids interested in different ways to invest their hard-earned money. There are stock market games that kids can play, using real-time information on what is happening in the stock market. Kids invest game money and use it to compete with each other. Once they see the potential of investing their money, and potentially making money, they may be interested in actually investing some of their summer earnings.
- Retirement. Many kids still in high school haven’t even thought about retirement. This is a great time to teach the concept of compound interest and how it can work for you. Starting a retirement fund at 16 verses 35 can create a nice nest egg with the possibility of early retirement. Besides the lure of a larger retirement fund and early retirement, there are other benefits to a teen Roth account. If money is used to purchase a first home, the money can be withdrawn free of taxes and penalties. Also, the Roth account cannot be used as income when applying for financial aid for college.
- College. If your child is considering college, it doesn’t hurt to have them pay for a portion of it. After all, if they understand how much hard work went into paying for college, they might understand how much time and energy you have put into covering the rest. Cost of tuition, books, fees, living quarters and just the basic college necessities keep rising every year.
- Down payment. Once a child gets their driver’s license, they want a vehicle to go with it. As much as we would all love to wave our wand and see a car magically appear in the driveway, we know that paying for another vehicle could cause us to go over budget. By working summers, they can save up for a down payment, pay for fuel and even help with the insurance.
Besides the financial aspects, summer jobs help foster confidence, time management, opportunity to learn more about themselves, networking and experience — and may even open up a door to a career they never thought about.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years of experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at email@example.com and read past columns at the Money Matters blog at www.moneymattersguam.wordpress.com.