Preparing Your Child for Their First Paycheck
Financial Literacy Starts At Home
There are many people who go through financial difficulties during their adulthood, and the main reason for this is lack of financial knowledge. In most schools, outside of colleges and special technical schools, financial literacy isn't an educational focus point; it's almost as if finances are a taboo subject. Breaking the chain of financial ignorance is a relatively easy task to complete and it has positive generational effects once it is accomplished. The first steps that a person normally takes to begin their path to prosperity is to get a job, so it is only right that a person's financial education includes detailed information about how paychecks work.
The Purpose of Job Income
If you explain to your child early why they need income, it will be easier for them to grasp the long-term benefits of having money. It is always best for a person to do something when they have a full understanding of why it benefits them. A full correlation between money and the things it creates is what a person needs to have if they are going to master finances.
A great deal of people grow up with a lackadaisical attitude towards work because they have a false belief that things can get better later whenever they finally decide to place an emphasis on wealth generation. The art of making money is identical to planting seeds in a garden; you don't plant seeds the day you need food. After a person has understood why they need to have income, they need to understand how to read a paycheck. A person cannot become financially well-off if they don't know where their money is going.
Reading a Paycheck
For the purposes of accounting, a person has to understand the difference between gross wages and what they are taking home in net profit. Once a person has an understanding of this, they will understand why their paycheck doesn't match what their average hourly wage is. It is easy for a kid to understand why they don't receive everything their paycheck says they've earned if everything is explained to them beforehand.
Even though it is easy for a kid to understand the concept of taxes, it is best to explain everything so they have a realistic idea of how much money they are going to be taking home with every paycheck. Once a kid has an accurate assessment of what they are going to be taking home, they will understand where they need to be working at to get what they want, and they will be able to understand how many hours they need to be putting in to get what they want. In order to fully explain this concept, a kid needs to know exactly what taxes are for.
Explain Taxes in Detail
Simply telling a kid that the government requires taxes is not a good way to explain to them why part of their paycheck is missing. A kid will be able to quickly grasp what is going on, but they may grow to resent paying taxes if they don't know what tax dollars are used for. The subject of taxes can be daunting if it is not properly broken down, so it's best to explain it step by step.
If you want to explain taxes in a way that matters, it's best to start small and work your way up. Start off by explaining the benefits of taxes to local communities, and expand from there, up to the country-wide government and what it uses taxes for. If properly explained, a kid may not want to pay taxes, but they will understand the good they are doing when they do.
Early Financial Education Is a Necessity
It is no coincidence they almost all financially set people have a mastery over finances. Financial mastery is a must for anybody who doesn't want to struggle. Prepare your child properly for the world by immersing them in business and economics from an early age.