If you are a working teen, you may have a lot of questions about earning and managing money. Finances are a complex topic and is something that even adults struggle with.
Figuring out how to manage your money is a big responsibility as is paying taxes and managing a bank account. Fortunately, this article should have some of the answers you are looking for and give you a better understanding of finances in general.
What is the Average Teenage Salary?
According to the site Packaged Facts, teens between 12 and 14 years old earn an average income of $2,167 a year and teens between 15 and 17 years old earn an average of $4,023 a year.
This number has changed dramatically in the past 50 or so years, according to the book Youth Employment and Minimum Wage:
“In 1966, about 40 percent of all 16-19 year olds had no wage and salary income, either because they were not employed or because their only employment was as unpaid family workers or in self-employment. Of those who were employed sometime during the year, 73 percent earned less than $1,000 a year.”
Young workers also earn less per hour than adult workers. According to the Bureau of Labor Statistics, in 2014, more than half of all workers earning minimum wage were under 25 years of age. Among workers between the ages of 16 and 19 years of age, about 15 percent earned the minimum wage or less, compared with about 3 percent of workers aged 25 and older.
How Old Do You Have To Be To Open a Bank Account?
Once you start earning money, you have to learn how to manage it. Having a bank account is a great way to learn about banking and budgeting. The minimum age for a checking account at most banks is 18 years old. Don’t despair though, most banks allow teens under 18 to open a joint account with their parent or guardian.
According to Practical Money Skills, which is a financial literacy program used to teach people about money, a bank account is a rite of passage and teens should get their first bank account while they are in high school. According to the site, about 80 percent of teenagers have bank accounts by the time they get to college.
Teens who have a bank account should learn the basics of running an account, such as checking the bank account balance daily, avoiding overdraft fees by spending within your means, saving receipts until a transaction goes through, using security measures to protect the account and etc.
Taxes are another one of the many new responsibilities teens have when they start working. Fortunately, teens only have to file taxes if they will be claimed as a dependent on their parent’s taxes that year and they made more than the standard deduction for a single filer, which is currently $6,300.
If they made less than this amount but federal taxes were withdrawn from their paycheck each week, they might want to file anyway so they can get that money back.
According to an article in USA Today, teen employees should file taxes, regardless of whether they’ll get a refund, because it is a useful learning experience:
“So it’s smart to file, even if it’s optional and little or no refund is coming. Your teen might get a little tax money back, assuming it was withheld, and he or she should also get a glimpse of what taxes are and how they work — and some early practice at keeping records for tax purposes. Parents would be wise to ‘walk through it with the kids,’ John Scherer [a certified financial planner with Trinity Financial Planning] said. ‘For most folks, taxes are one of their biggest expenses they have.’ And learning early that planning ahead can save real money can only help teens later.’”
Once you start making money online (or even offline), there are many things you can do with your earnings. Of course, you can always spend it or save it but you also have the option to reinvest it to make even more money.
There are a number of ways you can do this. If you made your money from running an online business, one of the most common ways to reinvest is to put some of that money right back into your business to help it grow even bigger.
If you don’t have an online business, and are making money online through a variety of odd jobs like paid surveys and etc, you can take those earnings and use it to start your own online business. Some types of online businesses teens can start are blogging, opening an online store, selling a service like tutoring, photography, graphic design, dog walking and etc.
You might be wondering how much of your income you should reinvest. According to an article on Entrepreneur.com, you should be reinvesting at least half of it and if you don’t reinvest any money at all, you are actually hurting your business and limiting your income:
“But if you don’t put some of that money back into your business, you’re starving growth. One of your big goals is likely to increase how much you earn, but you’ll earn the same amount year after year — or only make small, incremental increases — if you don’t put a portion of what you earn back into the business.”
This demonstrates why it’s important to take some of that money you made and find a way to make even more with it. It’s true when they say that it takes money to make money. The more you reinvest, the more you can earn.
Hopefully, this article gave you a better understanding of finances and money management. For more info about teen employment, check out our article on Teen Employment: Statistics and Info.
Youth Employment and Minimum Wages by U.S. Bureau of Labor Statistics, 1970
USA Today: Does Your Teen Really Have to File Taxes?: http://www.usatoday.com/story/money/personalfinance/2015/03/28/credit-dotcom-teen-taxes/70492044/
Practical Money Skills: Financial Literacy and U.S. Teens: Global Study Offers Path for Improvement: http://www.practicalmoneyskills.com/personalfinance/experts/practicalmoneymatters/columns_2015/0123_TeenFinLit.php
NBC News: Many Teens Carrying Credit Cards and Debit Cards: http://www.nbcnews.com/id/7493536/ns/business-personal_finance/t/many-teens-carrying-credit-debit-cards/
Bureau of Labor: Characteristics of Minimum Wage Workers: https://www.bls.gov/opub/reports/minimum-wage/archive/characteristics-of-minimum-wage-workers-2014.pdf
University of Washington: Handout: Teen Targets: http://depts.washington.edu/sexmedia/printouts/handout-teentargets.pdf
Entrepreneur: Why You Need to Reinvest Half of What You Earn Back Into Your Company: https://www.entrepreneur.com/article/247614
Bank of America: Money Management for Teens: https://www.bankofamerica.com/deposits/manage/money-management-for-teens.go