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Your First Paycheck: A Primer for Teens & New Income Earners

Your First Paycheck: A Primer for Teens & New Income Earners

August 09, 2023

So you got a job! That is a big deal and it’s going to be a time in your life you think back on mention often. The lessons you will learn and the memories you will make will last a lifetime.

Many people earn it and burn it, but if you're smart and disciplined, you can work for your money and then put your money to work for you.

Whether you want to save up for your first car, or college, or maybe you just want to be more financially responsible, I’ve got three tips that are essential to getting a good start as a smart and savvy money manager.


  1. Create a Budget: It might sound more complicated than it actually is but its easy to do and once you do it you’ll want to do a lot. Simply write a list of everything you spend money on and right next to each item, write how much you spend on it. Label this column EXPENSES.

    Now, write a separate column for your income and label this column INCOME. What you will see is a list of  how much money you make and how much money you spend. If you want to start saving more you need to either lower how much your spending on the items in the Expenses column OR you need to find a way to make more money to add to the INCOME column.

  2. Prioritize Saving: It will be tempting to spend down your entire paycheck. Millions of income earners do this twice a month no matter how much or how little they make. Write into your budget an amount that you “pay yourself.” In other words, with everything need or want to spend money on, make sure you understand the need to put money away in a separate account. A good place to start is setting a goal to save 20%.

    To help you do this, look into setting up a separate savings account. A bank or credit union will offer these accounts but you could also save your money in a brokerage account at an investment firm and invest your money in a money market that might pay you a higher yield. It is important to search out the place where your money can be put away but also earning you more money while it stays in savings.

    You can use a budget to set savings goals from one pay period to the next. You will want to stay disciplined for this reasons – it is easier for most people to make money than to save money. Some people have an impulse to spend money; if they have only a dollar let, they will feel the need to find something they can buy for a dollar. Don’t be like these people, instead pride yourself in your ability to be disciplined and wise.

  3. Consider Opening a ROTH IRA: If your employer offers a 401(k), it might be best to invest in that, especially if they will match a percentage of your contribution. But if they don't, you may want to consider opening a ROTH IRA either way. A ROTH IRA is a retirement account that allows you to save money that the government has already taxed. The government always wants its cut of your earnings but with a ROTH IRA, after a certain amount of time, any money that your investments profit you can be taken out tax free when you retire. Imaging saving $5,000 in a ROTH IRA and investing it in an S&P 500 index fund when you’re 19 years old. If you retire at age 62, that $5,000 could turn into over $91,000 assuming it had compounding interest of 7% annually. (The average annual return for the S&P 500 between 1978-2020 was 7.82%)

    This would mean you pay taxes up front, put away $5,000 now and when you retire, take out the rest tax free. Sound good? Whether it's stocks, bonds, money markets, mutual funds or ETFs, I would strongly recommend talking with an investment advisor to get started investing in any type of account.

    Get started now. Do it right. Be disciplined. Be patient. Get paid for your good decisions.