A Teen’s First Job

By Brittany N. Cox, Associate Advisor at Nestlerode & Loy, Inc.

Recently, my sister was hired for her first job. How exciting for her! She just got a car and now she will have the extra money to buy gas and do things with her friends. I remember being in the same situation myself when I was 16. The feeling of independence was great, but what I wouldn’t give to be able to go back to my first job and treat that extra money differently.

It’s not that I regret how much fun I had, but I probably didn’t need breakfast from Sheetz every morning before school when my mom was still buying groceries at home. I didn’t need to go out for dinner with a friend three to four times a week. Had I saved that money, I may not have so much student loan debt and dreaded credit card debt from my college years.

My point here is simple. Be sure to educate your teens about spending and savings. I know this is easier said than done. Just as I was educated about what my savings could help with in the future, I hope that my sister will also learn from my experiences and save some cash instead of spending it on trivial things that she does not need.

The common thought among teens is: “I’ll just save what I don’t spend.” Of course, that doesn’t result in much savings. One concept you can educate your teens about is the 5-Step Save/Spend Plan from themint.org. This plan goes through the steps to come up with a plan for saving and sticking to it. The biggest part of the plan is to track everything. Start by figuring out how much money you have coming in and what you spend or plan to spend your money on. If you are spending too much money to save the amount you set, cut spending where you can to meet your goal.

As your teen’s income increases, such as in summer months when they are working more hours, have them adjust their savings goal a little as well. It might be important to them to factor in a summer trip or amusement park visit, which should be allowed in the plan. After all, teens should be enjoying life before they head out into the “adult” world.

Some teens have goals to make bigger purchases, such as a first car. It is important for them to completely understand the interest and payments associated with a loan. When I asked my fiancé, “What is one thing you wish you knew about money or saving when you got your first job?” His response was “How much you actually spend on items that you finance compared to being patient and saving the money to make the purchase.”

He went on to talk about interest and how he understood the concept when buying his first vehicle but didn’t realize how long it would take to get rid of the payment. He traded his first vehicle on another which led to another loan with a higher payment and that has sort of snowballed for the past 15 years. But, he feels that if he would have had a clearer picture of the payments and interest, he would have been much better off to purchase his first vehicle with savings and had that free and clear toward a newer vehicle when he graduated college, which would have resulted in a lower payment.

On the opposite end of paying interest, is compounding interest on savings. I remember one of my business teachers in high school teaching us about savings accounts having interest and that the longer your money was there the more it would grow. She told us that the more money we saved before we had all of those pesky adult expenses, the more we would have in the future for things like retirement. I can’t express how I wish I would have listened. I am a person who loves to track things and write them out in an organized manner. If you don’t write it down did you really do it? Anyway, I feel that if I would have started tracking my money and savings in high school, I would have been much better off going into college with a savings account ready for those unexpected expenses of cars breaking down and books you need half way through the semester after the student aid money has all been spent.  

We are currently in a climate of extremely low interest rates and unfortunately, savers aren’t being rewarded as well as they were a decade ago.  Even so, don’t let this be a deterrent to saving; interest rates vary and are expected to slowly be on the rise.  

The most important thing for your teens to do to help them achieve financial success for their future is to track their spending. A friend of mine who is a branch manager of a bank says that she sees many teens that only check their balance online and assume it is correct and they don’t account for purchases made via debit card which haven’t cleared yet. They then overdraw their account and incur fees. Have your teens get started on the right foot by tracking their budget and bank account on paper where it can be seen and easily followed.