Ideally, your teen has been saving money ever since she received her first financial gift as a small child. But if saving hasn’t been a priority until now, a first job offers some great opportunities to start.

As we mentioned in Savings Basics, time is the greatest asset young people have in accumulating wealth. We cannot emphasize the importance of this fact enough—and neither can you when talking with your children. The sooner they start putting away some of their paychecks (at least 10%), the better. Here's what your teens need to know:

Build Savings into Your Budget

• Ever heard the saying “Pay yourself first”? Just as your teen is learning to budget money every month to pay bills and cover the essentials, he should also budget to save.
• Read more about the importance of budgeting. Use our budgeting tool to get a plan in writing.

Filing Taxes. Depending on how much your child earns, she may need to file an income tax return with the IRS. And even if she’s not required to file, she should if federal income tax was withheld from her pay, since she may be eligible for a refund.

Make It Automatic: Use Direct Deposit

• One of the easiest ways to save is to have paychecks automatically deposited into two accounts: put a set percentage (10% or more if possible) of the income into a savings account and the rest into checking.

Use Convenient and Tax-Efficient Savings Vehicles

• Retirement is probably the last thing on your young adult’s mind, but, as explained in the Saving and Investing sections in Financial Basics, getting an early start can make a huge difference. Explain to them why it’s so important to:
• Enroll in a 401(k) or other company-sponsored retirement plan. If the employer offers a 401(k) or similar tax-advantaged savings plan, encourage your child to enroll as soon as he or she qualifies. Many companies offer matching contributions; they’ll match employee contributions up to a certain threshold. If your kids don’t participate, they’ll be walking away from free money.
• Open an IRA. Once your teen has earned income, she is eligible to open an Individual Retirement Account (IRA). Here are some basic guidelines:
• If your teen’s employer does not offer a 401(k) or similar plan with a match, an IRA is the best place to start saving money for retirement.
• For those who contribute the maximum to their company’s retirement plan and want to save beyond that, an IRA is a smart choice. Anyone with earned income can open one. At Schwab, a parent or guardian may open a Custodial Roth or Traditional IRA for kids under 18. An IRA can be established for anyone, regardless of age.
• As long as your teen files a tax return to prove that he has earned income, he may make an annual contribution of any amount up to $4,000 (or the amount of his total earned income if it’s less than $4,000).

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The type of savings and investment strategies mentioned may not be suitable for everyone. Each investor needs to review a security transaction or strategy for his or her own particular situation. The examples mentioned are for informational purposes only and are not intended to represent results you should expect in the future. Data contained here is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed.