What did you do with your first paycheck?
I like to ask people about their first paycheck because it’s one of those widely shared rites of passage in our society. Rich with sentimentality and life lessons, talking about your first paycheck also serves as a good conversation starter on money, which many people find taboo or simply avoid.
I can remember mine: I was 14, working summers as a “kitchen girl” at a Jewish boy’s camp next door to my home in Waupaca, Wisconsin. It was the culmination of hours of minimum wage work – somewhere in the $2.20 per hour range at that time – and I saved it all for my back-to-school clothes. I loved my job and I was so proud and excited to be earning my own money!
You hear a variety of stories from people when they talk about their first paycheck. All of them can be learning experiences, especially for teenagers about to earn their first wages. In this blog, I’ll explore a few of the pitfalls and promises with that first check for young people. (In a follow-up piece, I’ll go through one of the most important ways you can help the young people in your life stay on top of smart spending and saving habits.)
Back to that first check … a few weeks ago, I heard a number of graduates from Milwaukee’s Ronald Regan College Preparatory High School. They were sharing stories of life on their own after high school with current students, educators and school partners like my organization. One college freshman, Fefe, talk about the value of learning to make smart financial choices – especially after bad ones she made with her first few checks from a fast-foot hostess job.
“Every time I got paid, I went to the mall and spent my entire check. I got to college and was amazed at how important it was to spend your money on what you actually needed versus what you wanted,” Fefe said, adding, “My advice to every teenager out there is to save, save, save, save!”
With Fefe’s perspective in mind, here are a few pitfalls and promises for teens and young adults earning those first paychecks. Make the time and energy you put into these jobs worth it!
What are all these numbers?: The categories, numbers, acronyms on a paystub … they can be pretty intimidating. You may even get the paystub electronically and not think to look at it. Early on at this first job, take a moment to talk through all of the numbers and categories on the paystub with someone you trust. For starters, your net pay (or “take-home pay”) is what you get after taxes and deductions. FICA are deductions for government programs like Social Security and Medicare. States have different rules regarding what and how much they take out.
Make your spending worth it: One of the big lessons I always hear from teenagers is when they realize the difference between “wants” and “needs”. It can be really eye-opening to see how spending on small items like snacks can add up. It can also be very tempting to have the latest shoes or clothes. Before all that, you’ve got to make sure you’re spending the money you earn on the things you need – your education, your future, your savings. Make your spending worth it by keeping track with a budget that separates your wants versus your needs.
Pay cards instead of checks: In some entry-level jobs, teens are given gift or debit cards for earned wages. Many are never told that they must be given the choice to be paid via check or direct deposit. The cards don’t provide a good way to save money or budget. It’s important for young people to know your options and rights. If confronted with these cards, consider the power you have in saving your own cash in your own savings or checking account.
Early saving pays off later: Like Fefe mentioned, you really benefit from saving if you start early on. It doesn’t have to be much, $5 here, $20 there. But if you think of saving as a personal investment – “paying yourself first” – it can go a long way toward the inevitable emergencies and fun opportunities that come along with adulthood.
Starting a savings/checking account: So, where are you going to put that money? Getting a steady check opens up the chance for you to start your first checking and/or savings account at a bank or credit union. With your money in a checking or savings account, it’s available from a safe place that should also hook you up with a debit card, checks and even a bit of interest. Also, a bank or credit union should be able to sync you up with direct deposit, which is faster and smarter than paying a check cashing store to get your hard-earned money.
Establishing your good name: One thing I haven’t mentioned yet – if you’ve already taken the initiative to get a job, then congratulations! It’s a huge first step on the path to living your dreams! Many of those dreams will require loans and credit. One thing you’re able to do with a first job is start to pay expenses on time. For instance, if you’re paying the bill on your phone, make sure you’re using the pay from that first job to pay that bill on time. Then, you’ll start to establish a strong credit score, which goes a long way when you want to start your own business or buy a house in a few years.
Like that first interview or those teen-year shifts, the lists and breakdowns above are just a start. Good financial habits require diligence and patience. They are also best learned with some guidance, like a “financial mentor”. In my next blog, I’ll share ways anyone can pitch in to guide teens and young adults toward stronger financial futures.
Brenda Campbell is president and CEO of SecureFutures – Wisconsin, a nonprofit based in Milwaukee that believes every teen deserves to feel confident and capable with money. With Campbell at the helm since 2006, Make A Difference – Wisconsin has empowered more than 55,000 teens through hundreds of volunteer-led lessons at schools and sites across Wisconsin and into Chicago. Campbell has years of experience in program development, management and evaluation in the areas of financial literacy, education, workforce development and child welfare. You can reach her at email@example.com.