School is almost out for summer! Teenagers will soon be looking for summer jobs to occupy their free time and earn some cash. I still recall the feeling of receiving my first paycheck, “I am rich!” I thought. Only to find out that Uncle Sam “stole” a portion of my hard-earned money before I could enjoy it myself. I feel like this universal experience was an initiation to adulthood, where the responsibility of a first-time job is met with a hefty dose of reality and financial accountability.

As a parent, you may be concerned that your child will spend their hard-earned money frivolously. Earnings from a summer job can be a low-stake opportunity to promote financial responsibility and financial literacy in your household. Nothing says, “Welcome to Adulthood,” like balancing budgets and filing taxes, but it is a critical lesson to ensure your teen has the tools required to conquer their future financial goals.

Taxes – Once your teen’s first paycheck rolls in, sit down with them to review their payroll deductions. Keep it simple – explain to them that taxes are a contribution that working citizens make to help support the country and governmental agencies. Some deductions, like Social Security and Medicare are required money we put away now, to benefit us later in life, whereas federal income tax withholding is like setting aside a portion of your paycheck upfront, so you don’t have a surprise tax bill at year-end. Help your teen understand that their take home pay (or net pay) is what’s left after these deductions are made, as this will be the money they will utilize to formulate their budget.

Let them know they may also be required to file a tax return. As a tax professional, I hear from my clients, family and friends that they dread tax time. Filing your taxes should not be a daunting task. Lead by example and keep tidy and organized financial records, so your teen will develop a good habit now.

Create a Budget – As your teen earns money, help them to develop a budget. When I was teenager, my parents took me to the bank to set up my first checking account and debit card. At the end of each month, we reviewed the bank statement together. Once it was all calculated, I was almost always surprised by how much money I had spent. Help them to outline their income and expenses, while allocating a portion of their hard-earned money to savings. Budgeting is a concept many grown adults do not practice, and a general understanding of a budget now will promote a strong foundation for the future when their financial situation grows complex.

Savings – You’re never too young to start saving, and the first summer your teen works is a great opportunity to open a savings account. Saving up for a new car or stacking away cash for a college fund can be surprisingly fun! I like to think of it as a challenge, always attempting to beat my personal best each month. The satisfaction of achieving a goal, along with financial security is gratifying, even at a young age.

Now that your teen has earned income, this is an opportune time to talk to them about various investment vehicles, like college savings plans, high-yield savings accounts, certificate of deposits and retirement accounts. Long-term saving plans can be a difficult concept for a young person to grasp, but kickstarting a retirement fund, like a Roth IRA at a young age provides advantageous tax savings over time.

Seize this opportunity to teach your teen about taxes, healthy spending habits and the importance of a functional budget. As your teen reaches adulthood, they will be equipped with the knowledge and skills required for a strong financial future and the ability to make rational financial decisions.

Published in the Victoria Advocate.

Carlee Gibbs, CPA is a staff accountant for Keller & Associates CPAs, PLLC.