Parent: “How much did you save from your summer job last year?”
Teen: “Umm, nuthin’.”
Time for a preemptive strike before summer rolls around again.
As Warren Buffett says, “Do not save what is left after spending, but spend what is left after saving.”
So, negotiate a savings split deal ahead of time.
If your teen agrees to save 27.68% of every paycheck this summer, you will agree to do one or more of the following...
- Match the savings.
- Increase access to the family car.
- Reimburse summer gas expenses.
- Stop nagging about the constant pile of clothes on the floor and dirty dishes in weird places. (I know, that’s crazy talk.)
- Allow free room and board. (Can we get a little gratitude around here?!)
OK, so that last one makes the arrangement more of a directive than a negotiation. It reminds me of Chris Rock’s definition of allowance.
With the negotiation (or directive) firmly in place, make sure your teen has separate spending and savings accounts (or cards) ready to go.
When the job starts, help your teen automate the paycheck split if possible. Many employers support splitting direct deposits percentage-wise between multiple accounts. If not, turn on activity alerts for your teen’s main account so you’ll know to manually transfer the right percentage to savings as soon as each deposit hits.
The added payoff for these summer paycheck splitting experiences? Your teen will be more likely to get an early jump on employer matched retirement savings plans later as a young adult. It will just feel natural. Smart move.
So, what should your teen do with all the accumulated savings at the end of the summer?
Start a Roth IRA, of course.
Then, 50 years from now when someone asks your teen: “How much did you save from your summer jobs?”
The answer could very well be: “Oh, about a hundred thousand dollars.”
Compounding over decades for the win!
Like this tip? Get the next one in your inbox by subscribing here.
Want to turn these tips into action? Check out FamZoo.com.