It may take some persuading when it comes to basic things like keeping their room tidy, but when money’s involved (especially if they’ve worked hard to earn it), many teens are capable of understanding fairly complex money related info. Here are five money matters to cover off with your teen when they get their first job.
1. Understanding tax
Start by explaining the very basics of tax – how it’s a fee that comes out of our salaries and funds public expenses such as roads, hospitals and schools for example. Make sure your teen applies for their Tax File Number (TFN) or TFN exemption and gives it to their employer, otherwise their pay can be taxed at the top rate of 47%.
Your teen won't be taxed on the first $18,200 they earn becuase this is the tax-free threshold.
Make sure your teen also links their TFN to their bank account, otherwise their bank is legally obliged to withhold tax on any interest they earn.
CommBank info: Anyone under 16 who’s earned $420 or more in interest will have tax withheld if there’s no TFN linked to their account. Anyone over 16 who’s earned more than $120 will have tax withheld if they don’t tell us their TFN.
2. Sorting out super
Talking about superannuation doesn’t have to be tricky. Looping it back to a time when your teen saved up for something they wanted is a good starting point. Explain how it’s automatically paid by employers and goes straight into their ‘super’, which they can access when they retire. And that it’s generally a good idea to only have one super fund throughout their working life otherwise they’ll pay fees for each super account they have (often seen as an unnecessary expense). If they move from job-to-job, encourage them to provide their super account details rather than opening new accounts with each job.
An employer must pay 9.5% of the value of your teen’s earnings into their super fund if they work more than 30 hours a week and earn more than $450 a month.
3. Smart spending & budgeting
Getting into the habit of knowing what’s coming in and out of their bank account is an important money skill for teens. It goes hand-in-hand with saving and smart spending - it’s all about keeping track and understanding that living from pay-to-pay isn’t sustainable in the long term.
Some teens might struggle with not spending their pay right away. Sometimes an important lesson is learned when they do. Experiencing the feeling of not having money when your teen really needs to buy something can help reinforce your advice about saving. Teach them to compare prices before buying, and avoiding impulsive buying can help them to stretch the money in their bank account.
CommBank info: Encourage your teen to regularly check their account balance in NetBank. This gets them into the habit of tracking when their pay cheque goes into their bank account and how quickly they spend it.
4. Savvy saving
Setting a savings goal is a proven way to build motivation to save, and build good habits for the future. For teens, it helps to make this visual e.g. encourage them use a picture of what they’re saving for as their screensaver so they see it every day. Our savings calculator can help your teen see how long it will take them to save up for something, and how much they’ll need to put aside from every pay.
CommBank info: Our Youthsaver account helps kick-start the approach to saving since it offers bonus interest for regular saving.
It’s really important to set the groundwork for your teens to financially thrive, not simply survive.