Your Teen's First Job: A Money Guide for Parents and Teens

A first job is a milestone for teens. It brings independence, responsibility, new skills and their own paycheck. It’s also a perfect opportunity for real-world money lessons that can set the foundation for a lifetime of financial confidence. Whether your teen is babysitting, working at a restaurant, lifeguarding or working retail, here’s how to help them make the most of their first job.

Understanding the paperwork

When your teen starts a job, they’ll typically fill out several forms. Form W-4 tells the employer how much federal income tax to withhold from each paycheck. Form I-9 verifies their identity and eligibility to work in the United States, requiring documents such as a passport or a combination of a driver’s license and Social Security card. Your state may have its own tax withholding form.

Help your teen understand these forms and keep copies of important documents.

Check your state’s rules on work permits and hours for minors. Federal law under the Fair Labor Standards Act limits the hours and types of jobs for workers under 16, and many states have additional rules, such as requiring work permits or limiting hours during the school year. These rules protect young workers’ safety and education.

Understanding the paycheck

Look at the first pay stub together. It’s a valuable learning moment that many teens never get. Explain the key parts.

Gross pay is the total amount earned before any deductions, based on hours worked and the hourly rate.

Taxes withheld include federal income tax and, in many places, state and local income taxes.

Social Security and Medicare taxes, sometimes labeled FICA, are withheld from most paychecks. These fund Social Security retirement and disability benefits and Medicare health coverage. Working and paying these taxes helps teens begin earning credits toward future Social Security benefits.

Net pay is the amount that actually lands in their account after all deductions. Many teens are surprised by the difference between gross and net pay, which makes this an important lesson.

Set up banking

Help your teen open a checking account and a savings account if they don’t already have them. Many banks and credit unions offer teen accounts, often with a parent as a co-owner or joint account holder. These accounts can teach teens to manage money while giving parents some oversight.

Setting up direct deposit makes getting paid easy and safe. Teach your teen to use online or mobile banking to track their balance and transactions, and explain how to avoid overdraft fees.

Make a plan for the money

Before the first paycheck arrives, help your teen make a plan for their money. A simple approach divides income into a few purposes.

Save a portion for bigger goals, like a car, college, a trip or a future emergency fund. Saving a set percentage of every paycheck builds a powerful habit.

Spend some on things they enjoy. Teens who earn their own money should be able to enjoy some of it, which also teaches them to make spending decisions and live with the results.

Give some, if that’s important to your family. Donating to causes they care about can build generosity and perspective.

Some families use percentages, such as saving half and spending the rest, but the right split depends on your teen’s goals and responsibilities. If your teen is expected to cover certain costs, such as gas, phone bills or entertainment, include those in the plan.

Start investing early

One of the most powerful financial moves a teen can make is starting to invest early. If your teen has earned income from a job, an adult can open a custodial Roth IRA for them. Contributions can’t exceed their earned income for the year or the annual IRA contribution limit, whichever is less.

Roth IRAs offer tax-free growth and tax-free withdrawals in retirement, as long as rules are followed. Because teens have decades for their money to grow, even small contributions can grow substantially through compound growth. Some parents encourage saving by matching their teen’s contributions.

Opening a Roth IRA is also a great way to teach teens about investing, compound growth and long-term thinking.

Understanding taxes

Many teens earn too little to owe federal income tax, since their income falls below the standard deduction. However, they may want to file a tax return to get back money that was withheld from their paychecks. Filing a return can also be a valuable learning experience.

Free filing options are available, including IRS Free File and Volunteer Income Tax Assistance programs. Teens who are self-employed, such as through babysitting or lawn mowing, may have different tax obligations if they earn above certain amounts, so check IRS guidance.

Learn workplace skills

A first job teaches more than money lessons. It builds skills like responsibility, communication, teamwork, time management and customer service, which are valuable throughout life. Encourage your teen to be reliable, ask questions and learn from the experience.

Balance work and school

School comes first. Help your teen balance work hours with homework, rest, activities and time with friends and family. Working too many hours can affect grades and well-being, so check in regularly about how they’re managing. A first job should support your teen’s growth, not overwhelm them.