By Carmen Reinicke - CNBC + Acorns
Teens haven't had a better summer to work for in five decades.
In June, the unemployment rate for teens ages 16-19 was
9.9%, the lowest since 1953,
according to data from the Bureau of Labor Statistics.
A combination of post-coronavirus factors has led to a surge in teen hiring, according to Alicia Modestino, an economist and professor at Northeastern University in Boston.
Older workers who were laid off during the coronavirus pandemic may continue to receive unemployment benefits or may no longer want the jobs they previously held;
The highest job gains have been in fields that teens can hire, such as retail stores and restaurants.
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"There are all these workers who are hesitant to come back, but employers are desperate to hire because it is summer," Modestino said.
This means that
many employers are turning to teens:
they are eager to work, usually do not need benefits, and generally accept lower wages.
To be sure, the recovery in adolescent employment is not the same across the board, highlighting an uneven rebound in the face of the pandemic.
While the unemployment rate for white teens was 9% in June, the rate was 9.3% for black teens and
13.2% for Hispanics, the highest of all groups.
Still, for the young people who are working this summer, it is a golden opportunity to
learn the basics of personal finance and start building wealth.
"The beauty of this, especially from a parent's point of view, is that they have the opportunity to develop habits from an early age," said certified financial planner Tom Henske, a financial advisor at
Fifth Avenue Financial
in New York.
Financial experts recommend starting with the basics of banking, saving, and investing if you have teens who are working for the summer.
Taking a leap in these things can have a huge impact on the rest of your financial life.
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Establish a banking relationship
When one of your children begins to earn their own money, a good place to start is by getting them into a banking relationship, Henske said.
This means opening a checking or savings account for them, he said.
He also recommends that they have a debit card.
Many banks, credit unions, and other financial companies
offer low-cost or free accounts for younger clients.
Some are specifically geared towards teens and offer investment opportunities as well as debit cards.
Having a checking and savings account set up for your teen will help you begin to think about where the money will go from that job.
Make a budget
Once you've helped your teen establish a banking relationship, it's time to talk about budgeting.
For many children, having a summer job is
their first chance to have money of their own to spend.
Parents can help them establish good habits by giving them certain financial responsibilities, such as filling the car with gas, paying for their expenses when they go out with friends or buying their own clothes with their new earnings, according to Henske.
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This helps young people
learn the value of money and how to distinguish between wants and needs, he
said.
Open a Roth IRA account
If your teen has earned income (which means they pay taxes on their wages, not get paid under the table) they are eligible to open a Roth IRA account (IRA stands for Individual Retirement Account) .
This type of IRA is a great way to
start investing and saving for the future.
And, opening one as a young adult can give your teen a boost to build their own personal wealth.
In 2021, a teenager can deposit $ 6,000 into a Roth IRA, which will grow tax-free.
They can also withdraw any part of the money they put in without penalty, although if they wanted to make a profit, they would be fined.
It's important to point out to teens that they
can access the money they put into a Roth IRA without penalty,
according to personal finance expert Suze Orman.
"If they have saved this money and then they want to buy something with it and
you say no, they will stop saving,
" Orman said during a June
CNBC + Acorns Invest in Pride: Ready, set, grow event.
Henske also suggests another approach to incentivize your teens to save in a retirement account and take advantage of other financial tools later: You can
match the amount your teen has set aside
for the account.
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"They'll know when they start their first job after college, when it's time to sign up for a
401 (k)
, that they're supposed to put money in because they're going to match it," Henske said.
Once your teen has started saving in a Roth IRA, they can also
start investing through the account.
Orman suggests guiding your teen through investing and jointly learning his different options.
Henske agrees that dialogue is important and cautions that
parents don't have to know everything about money.
It may be something you learn together, he said.
Of course, there
is
always
a risk when investing in the stock market.
But, according to Orman and Henske, making mistakes early when the stakes are relatively low is a great way for your teen to learn investment best practices.
"Let them make mistakes when they are younger and
let them have autonomy with their money,
" Orman said.