Is Your Teen Enjoying the Booming Job Market? How They Can Maximize Earnings
Teenagers across the nation are enjoying a booming job market for their demographic. According to recent data from the Bureau of Labor Statistics, the unemployment rate for teenagers between the ages of 16 to 19 was 9.9% in June. This marks the lowest rate for this age group since 1953.
What is the cause of the availability of these jobs and how can teens maximize this opportunity for their own financial gain?
Why the High Availability of Teen Jobs?
There is no doubt that this is a great time to be a teenager in the job market in the US. The ongoing COVID-19 pandemic has led to a proliferation of jobs for this sector. While the pandemic has been a disastrous blow to the global economy, the proliferation of low-wage jobs has been working to the advantage of teens looking for their first position.
Workers who lost their jobs during the early days of the pandemic may still be hesitant to return to the workforce. This is particularly true if they are receiving hefty unemployment benefits. This has left many positions open for teens who are looking to break into the industries of restaurants and retail. In addition, business owners and managers are attracted to hiring teenagers because they usually do not require benefits and they are willing to work for lower wages.
Now that your teen has secured their first job, what can they do to make the most of it?
Set Up a Bank Account
The first step that your teen should take when they receive their first paycheck is to set up a bank account. Establishing a banking relationship will encourage more financial responsibility. A checking and accompanying savings account will help to teach your child how to manage their money along with the basic principles of banking. Be sure to also get them a debit card. Because teens are so tech-savvy, they will likely get the most out of using a banking app compared to a traditional way of banking.
Many banks and credit unions offer no-cost accounts for teens just getting started on their financial journey. It is a good idea to take advantage of these opportunities so that your teen can begin to establish good spending and saving habits.
Open a Roth IRA
It is never too early to start thinking of retirement. Assuming your teen is not being paid under the table, they are eligible to open a Roth individual retirement account (IRA). In 2021, a teenager is eligible to put up to $6,000 in a Roth IRA. This money will grow tax-free, providing significant benefits as your child works to build wealth.
If you are in a good financial position to do so, consider matching what your child invests in their Roth IRA. This will help to teach them the power of matching investments so that they understand it better when they get their first professional job.
Make a Budget
Once you have your checking and savings account set up, it is time to start thinking about a budget. For most teens, this may be the first time that they have had control of their own money. As a parent, you can help to guide this life lesson by instilling good financial habits with them. For example, help them to figure out how much fun money they need to get through the summer. Will they need a set amount for gas for the car, time out with friends, or to buy new clothes?
Once you have established this amount, encourage them to take the rest of their earnings and put it into their savings account. This is why it is recommended to set up both a checking and a savings account. Teens will be more likely to not blow all of their money on frivolous expenditures if they can see their nest egg growing. You may be surprised to see that your child actually spends less when it is their hard-earned money that is on the line.
Watching your teen land their first job and take on this new responsibility is an exciting season of parenthood. You can do your job as a parent by helping to provide the tools and knowledge that your teen needs to leverage these opportunities to learn more about personal finance.