Teach Your Teen to Read a Paycheck

FinStrike helps teens build real-world money skills through a four-year financial literacy curriculum, a Smart Tutor that helps students around the clock, and extensive free resources for parents and students.

Your teen works ten hours, does the math in their head, and expects a certain number. The actual paycheck arrives, and it is lower. Good. This is the moment to teach how money really moves. Pay is not just rate times hours. There is gross pay, then taxes, FICA, and withholdings that turn it into net pay. Once they see the flow, the mystery disappears.

Paycheck Anatomy

Walk through your teen's paycheck together, line by line.

• Gross pay: Number of hours times hourly rate, plus any overtime or tips.

• Federal income tax: Based on the W-4 your teen filled out on day one. This is an estimate against their year-end tax bill.

• State and local tax: Varies by state. Many teens forget states take a cut too.

• FICA: Social Security at 6.2 percent, and Medicare at 1.45 percent. These are not optional.

• Pre-tax items: Rare for a first job, but things like 401(k) or HSA lower taxable income.

• After-tax items: Uniforms, union dues, or other employer deductions.

• Net pay: What hits the bank through direct deposit.

Have your teen circle gross pay, each tax line, FICA, and net. Seeing the parts broken down creates a better understanding.

Fix the W-4

Most first jobs start with a rushed W-4. Small mistakes can lead to incorrect withholdings. Here is a simple checklist.

• Filing status: Single is standard for most teens.

• Multiple jobs: If your teen has two jobs, use the W-4 worksheet or the IRS estimator so withholding is not too light.

• Dependents: Do not claim them on the teen’s W-4 if you plan to claim them on your return. Claiming here changes withholding, not who gets the tax benefit.

• Extra withholding: Leave blank unless you want a little more taken out to avoid a bill in April.

• State form: Many states have their own version. Do that, too.

• Direct deposit: Route pay to checking, and set an automatic transfer to savings on the same day. Paying yourself first is a habit that your teen should learn early.

Common pitfalls to avoid: checking “exempt” without qualifying, forgetting to update after a second job, ignoring the first stub after a change. One quick review now beats a surprise later.

Five-Minute Family Review

Make this a routine your teen can run.

1. Open the paystub and read gross pay, federal tax, state tax, Social Security, Medicare, and net pay out loud.

2. Compare hours worked to hours paid. Errors happen.

3. Confirm direct deposit hit, then move a set percent to savings the same day.

4. Ask one question: what small change would increase next paycheck without more hours? Examples include better shift selection, hitting a bonus, or avoiding unpaid breaks.

5. Log the stub in a simple folder for year-end tax time.

Call to Action

Print a recent stub, and do a five-minute dinner review tonight. Once your teen can read a stub, they can better prepare for their financial life ahead.