Schwab MoneyWise ®
Schwab MoneyWise®

Your Teen's First Income

New responsibilities. New opportunities.

Our Two Cents

Because your teen is your dependent, their taxable income is linked to yours. Get more detailed information about income taxes.

Whether your teen is babysitting, mowing lawns, or working in an office, a first job can provide many positive, educational, and confidence-building experiences beyond just receiving a paycheck. It can offer the opportunity to:

  • Develop personal and financial independence.
  • Learn how to deal with supervisors, coworkers, and customers.
  • Develop responsibility and a strong work ethic.
  • Acquire lifelong good habits.

Managing money and expectations

Now that your teen is making money, it's important to help them manage their income. To help your teen act responsibly and make the most of their paychecks, share these tips.

Handling a paycheck

A paycheck from a first job is likely the most income your teen has had so far. Help them understand that this isn't an invitation to spend more, but a chance to learn how to be responsible. Give them these tips to help them handle their paycheck wisely:

  • Open a checking account and a savings account (if they haven't already).
  • Consider linking a debit card to the checking account.
  • Learn how to create a budget.
  • Look carefully at each pay stub, and check the rate and hours for errors.
  • Deposit checks immediately—or use direct deposit.
  • Avoid using payday loan services, which charge high fees and higher interest rates than banks or credit unions.

Paying taxes

Of course you want to help your kids understand that once they start earning income, Uncle Sam will expect his part. Here are some initial tips for dealing with taxes:

  • Prepare them for tax shock. It can be disappointing to see how much taxes reduce their take-home pay.
  • Help your teen fill out their Form W-4. For now, because your teen is your dependent, they aren't entitled to claim an allowance. But this can be a great opportunity to explain how withholding works.
  • If the employer doesn't withhold taxes, make sure your teen sets aside enough money to pay their taxes come April.

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The information on this website is for educational purposes only. It is not intended to be a substitute for specific individualized tax, legal, or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner, or investment manager.

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