1So You’ve Got A Working Kid…
And they’re finally bringing home a paycheck. Congratulations! I know what it’s like, having raised two kids myself. So it’s important you have a conversation with them on being wise with that paycheck, before they go out and blow it each week on things like an iPhone and music downloads. A lot of times kids get this notion that if they’re getting paid 10 bucks an hour, that’s what they’re gonna bring home. But you and I know there’s taxes and other payroll deductions they’re faced with. They’ll soon find out they may have 10% or more out of that paycheck gobbled up in taxes. An important lesson.
2Now That Your Kid Is Bringing Home A Paycheck
They need to have set-up their own bank account. And I recommend they set up one where they can deposit the money. I recommend your local credit union. After all, your kid is probably not writing a lot of checks. And they offer pretty amazing benefits for members who open accounts. Plus, you can get things like a low interest rate loan, if your kid’s in the market for a new car…. credit cards, that are typically less cost than traditional cards, and more. So if your kid is bringing home a paycheck, make sure they’re putting the money into the bank—a credit union is what I recommend—and make sure they are setting up forms of savings accounts for that money also.
3Setting Up Their Account
Your kid needs to have a checking account, namely with a credit union, the minute they start bringing home a paycheck. And once they have that all set, their next step is to set up an autodraft on that cash, monthly, to fund it into a low cost growth mutual fund. For example, Fidelity or Vanguard or Janus are all good no-load fund families. Draft 50 bucks a month, or more, and help them select a good long-term growth mutual fund, doing some internet research on your own. The compounded value of only 50 dollars a month, for the next 40 years of your kid’s life, if they start at age 19, at a measely 8 percent becomes over 174 thousand dollars! Can you imagine?!
4Tracking Their Paycheck
They’ll need to make sure any money they are spending, they are watching where it goes. And I bet they’re pretty internet savvy. So consider buying the a copy of Quicken to track their monthly expenses and have some accountability for where the money goes. I know some parents who even require their kid, in exchange for living at home still, to submit a monthly expense sheet so the parents can see how much the kid is blowing on important stuff… you know, like beer and concert tickets. The point is, there’s a lot of very good tracking tools you can link with your online banking now. And I highly recommend you train your son or daughter, at this age, to track those expenses like a hawk. It’s a good habit that many adults sure wish their parents taught them how to do.
5The Bottom Line
My goal is this: To raise your kid to be a self-sufficient, self-reliant, responsible adult, who knows how to generate an income and be responsible with it. And I’ve gotta tell you, as someone who’s been around the money and financial industry for nearly 30 years, that’s a stretch for a lot of people. Kids learn by example. And we’re not good examples, as a nation of broke, in-debt, under-savers, who live paycheck to paycheck. Consider using pre-paid debit cards with your kids. A great idea. And the bottom line is that even though you may have never done this, it’s never too early to adopt some of these strategies and put them into place with your own child. They deserve it, and I know as a parent myself, you always want your kids to have it easier than you did