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Citibank's Teenage Money Guide

Who can forget their first summer job? Some were certainly cooler than others, but whether they involved lifeguarding or lawnmowing. They still brought that first taste of financial freedom. Sometimes you managed to save a bit for the first year of college or a new car, but more often that not, a lack of knowledge about simple money management meant that most was spent on movies, pizza, and shopping sprees.

Times haven’t changed. Today, teenagers are making more money than ever – – as a group they earned over $100 billion in l996 — and summer jobs are playing a big role. For many teens, their summer paychecks are their first chance to handle large amounts of money. As such, it’s also a great time to learn the in-an-outs of spending and saving.

Steven Sanders, a financial consultant and the spokesperson for Citibank’s Money Matters for Young Adults financial education program, explains that “Most teenagers don’t think about managing money — they think about spending it. That’s okay to a point, because it may be their first chance to learn the value of their money. But teenagers can also use their summer jobs to learn how to balance needs and wants with simple paycheck budgeting.”

Sanders offers the following tips to help you guide your teenager through the steps:

— Begin by determining “take-home pay” for the entire summer. The difference between the rate of pay and “take-home” pay is a source of disappointment for many first-time workers, so make sure your child is aware of how deductions will affect actual income. Your child should know what their net income for the summer will be, so he/she can develop a realistic budget.

— Sit down and develop a spending plan. No one likes to follow a budget. So, encourage your child to devise a spending plan once their summer income is determined. It is important to emphasize that a spending plan should be flexible, and revise it as changes need to be made.

— Help your child identify “needs” and “wants”. The first component of the spending plan is to identify “needs” (transportation to work, school supplies, etc.) and “wants” (the latest footwear, an expensive gift for a friend). The “needs” comprise your child’s unavoidable expenses, while the “wants” should be treated as rewards enhancing your child’s happiness, but unnecessary for daily living. Your child cannot foresee every “want” that might crop up during the summer, but stress that a person cannot do or buy everything.

— Discuss a savings objective to reach by the end of summer. The second component of the spending plan is savings. It is very easy to reach the end of the summer and have nothing tangible to show. If your child can identify a savings objective — to have $500 by summer’s end, or enough money to pay for a football uniform, or to save $1,000 toward college — it is much easier to find ways to save. It builds self-confidence and belief in money management if a financial goal is reached. Encourage your child to “pay yourself first” by putting aside a portion of every paycheck in an interest-bearing savings account.

— Make the financial world accessible. Young adults should familiarize themselves with the financial sections of their local newspapers as a start. Encourage them to create an imaginary “stock portfolio” of companies selling products they buy. Track the results together. Advertisements, seminars or brochures may be helpful in providing a broader perspective on the world of personal finance. Set up a bank account with your child, and if they are old enough, consider the feasibility of he/she applying for a credit card.

— Remember that anyone over the age of 14 should be prepared to deal with taxes. If a young adult earns $4,000, has unearned income of $650, or if combined earned and unearned income totals more than $650, then the law requires he/she to file a tax return. The good news is that if he/she earned less than $4,000 (likely at that age), a refund may be coming. Remind your child that a refund is money that he/she worked for, not a present from the government. Encourage them to save a portion of it, or have it directly deposited into a bank account.

“By establishing good money management habits from the beginning, a young adult starts building a secure financial future,” says Sanders.

Citibank Cards is offering a free brochure titled “Beach Blanket Budget: How to Manage Your Summer Salary” aimed at teenagers who will be working during the summer. The brochure offers teens tips for how to manage their money wisely without sacrificing their fun. Citibank Cards also offers a free booklet, Money Matters for Young Adults, that addresses a wide range of personal financial topics. Both are available by calling 1-800-669-2635.

Citibank is the largest issuer of MasterCard and Visa in the country, with over 38 million cards in circulation.

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