Children grow up incredibly fast, and before you know it, it’s time for them to branch out into the world and get a job. This goes a long way into fostering both independence and financial security, but the transition into work can be a little mentally and emotionally dicey. On the journey to and through employee status, you are an invaluable guide to your kids.
Kids often are responsible and skilled enough to work before they legally can grab a regular paycheck, so parents typically become a child’s first employers. For example, you might pay your child the going rate to mow the lawn, help you paint a room or troubleshoot your quirky laptop. In your role as first employer, it’s your job to explain the type of expectations real-world employers have—that is, you have to make it clear to your child what professionalism means. You might be okay with it if your child works totally different hours than promised or drops some choice words for uncooperative equipment, for instance, but that type of inconsistent or negative behavior isn’t what employers want in the workplace and generally isn’t tolerated.
Even though your child is able to work, he might still be a minor, which means he probably doesn’t have the experience to know what is best for his money 100 percent of the time. Financial habits are still developing, and as a parent, you shape those habits for your child. You can’t completely dictate what he does with his money (after all, it’s his and he’s earned it), but you can encourage him to budget and set his earnings into individual pools such as charity, savings and spending.
Just as you have expectations for what your child should do with his earnings, he likely has some expectations for the money, too. Parent-child jobs usually mean that earnings promised are earnings paid, such as giving him $10 when you offer $10. In the real workplace, your child won’t really get the full $10, because some is withheld for taxes and gets eaten up by expenses like transportation. Go through the difference between net and gross wages and discuss how that might affect your child’s initial budgets.
The Technical Stuff
When you employ your child, it’s often a simple set-up of word-of-mouth promises. Your child says he’ll do something, and you say you’ll pay. It’s not the norm to have your child formally go through a contract and other legalities. Introduce essentials such as cover letters, résumés, applications, and tax forms. Print off some examples of these documents so your child really can practice and see what you’re talking about.
As your child begins to earn money, get him to set up a basic savings or checking account if he has not done so already. This functions in several ways. First of all, it often meets employer need, as some employers rely on direct deposit payment to eliminate administrative costs. Secondly, most banks are backed and provide perks like interest, making them more secure than under-the-mattress saving and providing some return. Lastly, it introduces them to the banking system, making it easier to do things like make standard, no-hassle electronic debit transactions. Your child can always switch accounts or management methods once he’s been working a little and has a better feel for his own financial habits and needs.
Young workers are still gaining experience that contributes to good rationalizations about money, so they still are fighting to reign in impulse or emotional spending. They don’t always immediately see that the way they work drastically can affect their financial future. Make this clear by discussing items such as Social Security, IRAs, pensions and general investing, as well as résumé and career development.