Schwab MoneyWise ®

Getting Serious About Saving

A first job means a chance to save more

Our Two Cents

Saving 10% might seem like a lot, but it’s best to get teens used to this figure while they still have the cushion of living at home. Starting to save when they first move out is difficult, since the true cost of independent living can be shocking—and saving can be last on their priority list.

Ideally, your teen has been saving money ever since receiving his or 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.

Time is the greatest asset young people have in accumulating wealth, and you can't emphasize enough the importance of saving. The sooner they start putting away some of their paychecks (at least 10 percent), the better.

Here's how to make it easy and automatic:

  • 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 or she should make saving a part of the budget. Use our to get started.
  • Use direct deposit. One of the easiest ways to save is to have paychecks automatically deposited into two accounts. Put a set percentage (10 percent or more, if possible) of the income into a savings account and the rest into a checking account.
  • Use convenient and tax-efficient savings vehicles. Retirement is probably the last thing on your young adult's mind, but thanks to the benefits of compound growth, getting an early start can make a huge difference. Explain why it's so important to do the following:
    • Enroll in a 401(k) or other company-sponsored retirement plan. 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 kids have earned income, they can open an individual retirement account (IRA). As a parent or guardian, you can also open a custodial IRA for kids under 18.

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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