Congrats to your teen on her first job! How did she react to her first encounter with the taxman? LOL!

All joking aside, you have a golden opportunity to discuss money with her if you haven’t done so before. Every kid is different, so your conversation will likely need to be customized accordingly. Below is our suggestion for a “balanced approach” to guide her on saving, investing, and enjoying her paycheck.

The 50/30/20 Rule

• 50% Spending: Enjoy your hard-earned money! Set aside half for fun, clothes, or things you want.
• 30% Saving: It’s incredibly important to save. Having an emergency fund is essential—even for teens.
• 20% Investing: Learn about investing early. Concepts like risk, return, diversification, not timing the market, compounding interest, and ETFs are key. Consider opening a joint investment account with a parent or using teen-friendly apps that focus on learning about the market.

Goal Setting The fun part! Set financial goals. It could be something small (like saving for a gadget) or long-term (like contributing to college funds). This drives discipline, motivation, and focus.

Budgeting Vital! Track your spending. There are many budgeting apps available, or you can create a simple system on paper or in a spreadsheet. Financial responsibility 101 starts early.

The Power of Compounding Saving and investing small amounts now can grow over time. An amount invested today can multiply due to compound interest. Compound interest is when you earn interest on both the money you initially saved (the principal) and on the interest that accumulates over time. So instead of just earning interest on your original amount, you start earning interest on your interest too. For example, if you invest $100 at an interest rate of 5% per year, after one year, you’ll have $105. In the second year, you earn interest on $105, bringing your total to $110.25. Over time, this can lead to significantly more money compared to simple interest, where you only earn on the original amount. The longer you leave your money to grow, the more it compounds!

Make Room for Giving Try it! It doesn’t have to be a huge amount, but see how great you feel after making your first donation. We would love to hear where you gave, why, and how you felt afterward.

By guiding your teen through these steps, you’re equipping her with valuable skills she’ll carry into adulthood. It’s all about striking a balance between enjoying her earnings today and planning for her financial future. Happy teaching!