Teaching Financial Literacy To Teens: Making Money

Your teenager may be interested in earning more money than is possible through an allowance and the occasional odd job. There are many benefits to having a job. Part-time work can provide a teenager with:

• A source of income
• Career guidance
• Independence
• Real-life experiences
• Responsibility
• The chance to develop interpersonal skills in the workplace
• The opportunity to learn new skills
• Time management experience 

It should be noted that there are also drawbacks to working. Teenagers who work - especially those who work more than 20 hours per week - may have a harder time completing their school work, may have lower grades in school (often due to fatigue and lack of preparation), may have increased stress (trying to "fit it all in") and may develop a negative view of work. Naturally, the negative aspects of working are not one-size-fits-all, and while one teenager may suffer in school because of a job, another might thrive because of a growing sense of independence and accomplishment. Because no two kids are alike, it is important for parents to be aware of how work may be affecting each individual child, making any changes to the job and scaling back hours as necessary.
 
If a child has difficulty balancing school and work, summer employment provides an excellent alternative since it will not interfere with education. Popular summer jobs include:

• Amusement park jobs
• Babysitting
• Certain food service jobs
• Dog walking and pet sitting
• Jobs at summer camps (such as a camp counselor)
• Landscaping
• Lifeguard
• Movie theaters
• Newspaper delivery
• Office intern
• Retail jobs (such as grocery, clothing and electronics stores)
• Tutor 

Fair Labor Standards Act (FLSA)
Before beginning any job, it is important to understand what an employer can and cannot expect from your child. In the United States, the Fair Labor Standards Act (FLSA) of 1938 ensures that "when young people work, the work is safe and does not jeopardize their health, well-being or educational opportunities."  The Department of Labor has set forth these guidelines for permitted jobs, by age group:
 

Age	Permitted jobs (according to U.S. Department of Labor)
Under 14	Deliver newspapers Babysit on a casual basis Act or perform in movies, TV, radio or theater Gather evergreens and make evergreen wreaths Work for a business owned entirely by your parents as long as it is not in mining, manufacturing or one of 17 other hazardous occupations Non-hazardous agricultural jobs outside of school hours
14 and 15	Retail occupations Intellectual or creative work (e.g., computer programming, tutoring, acting playing an instrument) Clean-up and yard work (excluding hazardous equipment) Work in connection with cars and trucks such as pumping gas and washing/polishing Some kitchen and food service work Cleaning vegetables and fruits Loading or unloading objects for use at a worksite Limited tasks in sawmills and woodshops 15 year olds may be able to perform lifeguard duties at traditional swimming pools and water amusement parks Non-hazardous agricultural jobs outside of school hours
16 and 17	Any job that has not been declared hazardous by the Secretary of Labor (hazardous jobs include things such as manufacturing or storing of explosives; coal mining; using power-driven woodworking machines; mining; roofing and work performed on or about a roof; trenching and excavating; and anything that provides exposure to radioactive substances and ionizing radiation) Any farm job and any time
18	Any job

 
In addition to which jobs can be legally performed, younger teenagers are limited in what hours they can work: 
 

Age	Hours
14 and 15	Work must be performed outside of school hours Up to 3 hours per school day, including Friday Up to 18 hours per week when school is in session Up to 8 hours per day when school is not in session (e.g., summer vacation) Up to 40 hours per week when school is not in session Between 7 a.m. and 7 p.m. on any day, except from June 1 through Labor Day when hours are extended until 9 p.m.
16 and 17	No limits
18	No limits

 
 Information on child labor laws, including specific rules for agriculture and a complete list of hazardous jobs, can be found at the U.S. Department of Labor's "Youth Rules!" Web site at www.youthrules.dol.gov.
 
What Parents Can Do
Getting a job may be a big step for your teenager, and it can be a learning experience for everyone involved. You can help your child have a positive experience by:

• Discussing a job's advantages and disadvantages
• Identifying the job's responsibilities and what the employer may expect
• Helping prepare a budget (where will his or her money go?)
• Creating a daily and/or weekly schedule to promote effective time management, allowing for some family time in the schedule
• Teaching practical ways to handle tough situations at work and school (often, these teaching moments are the result of something that has already happened)
• Supporting your child - if things are going well, or if the job needs to be rethought because your child is having trouble balancing work and school 

Taxes
Explain to your teen that when people earn wages for working, they don't receive all the money they earned. Some of the earnings go to the federal and state governments as taxes that will be used to pay for roads, public schools and other programs. Review your child's pay stub, which is attached to his or her paycheck, and point out:

• Gross pay (the total amount earned)
• Federal taxes
• State taxes
• Social Security and Medicare taxes
• Net pay (the "take home pay") 

Depending on your teen's earnings, he or she may have to file an annual income tax return with the IRS. Keep in mind, tax returns are driven by income, not age, so even young people may be required to file. When does a teen have to file? According to IRS Publication 929 (view at www.irs.gov; enter "Pub 929" in the search box) a dependent who has only earned income (such as wages from a job) must file if they earned $5,950 or more. The figure is much lower for unearned income (such as from interest): your teen will have to file if he or she had $950 or more in unearned income. Note: The IRS states: "A parent of a child under age 19 (or under age 24 if a full-time student) may be able to elect to include the child's interest and dividend income on the parent's return. If the parent makes this election, the child does not have to file a return."
 
A dependent who has both earned and unearned income must file a return if his or her total income is more than line 5 of the IRS worksheet:
 

Filing Requirement Worksheet for Most Dependents
1.       Enter dependent's earned income plus $300
2.       Minimum amount	$950
3.       Compare lines 1 and 2. Enter the larger amount
4.       Maximum amount	$5,950
5.       Compare lines 3 and 4. Enter the smaller amount
6.       Enter the dependent's gross (total) income. If line 6 is more than line 5, the dependent must file an income tax return. If the dependent is married and his or her spouse itemizes deductions on a separate return, the dependent must file an income tax return if line 6 is $5 or more

 
Some dependents may have to file a tax return even if their income is less than the amount that would normally require them to file. For example, your teen might have to file if he or she owes social security and Medicare taxes on tips not reported to his or her employer or on wages received from an employer who did not withhold these taxes; or if he or she had earnings from self-employment of at least $400. When in doubt, consult with a tax specialist. Keep in mind, even if your child is not required to file, it may be a good idea to do so because he or she may be eligible for a tax refund.