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What To Do With Your First Paycheck

We help you prepare for your first bit of money flowing into your account! From preparing to pay taxes to creating your very own budget, Kids’ Money is here to help!


Congratulations on your first paycheck, and welcome to the world of huge milestones that are ahead of you in your young adult life! This is a hugely exciting time and the perfect opportunity to set yourself up for success by establishing important habits that you can carry with you into adulthood. 

Right now is the perfect time to have conversations with your parents and other trusted adults in your life about money, personal finance, and budgeting to set goals. 

Let’s talk about what to do with your first paycheck! And make sure you head over to our earning money for teens center for more related reading!

Importance of Paycheck Discipline

“Discipline” has earned a negative reputation, but it allows us to live our lives efficiently and effectively. 

Discipline is a series of small sacrifices now so we can have a better future later. 

Discipline helps us set daily habits that become easy-to-follow routines that set us up for success.

Paycheck discipline is important because it helps us set goals and reach them by enabling us to build up habits such as saving, investing, prioritizing needs vs. wants, and effectively managing our available resources.

How to Set Up a Bank Account

If you have been receiving an allowance from your parents, you probably already have a savings account with some money. If you do, reach out to your bank and ask to open a checking account and have it linked to your savings account so you can easily make transfers between the accounts.

If you don’t have an account already, research local banks to find one that fits your needs. Some things to consider:

  • Interest rate paid on monthly balances
  • Fees charged monthly, quarterly, or annually and what triggers those fees
  • Do they have locations near you if you need to go into a bank branch?
  • What are their ATM fees?
  • Do they offer direct deposit for your paychecks?
  • What are the minimum balance requirements to keep your account open and active?

Once you’ve found a bank you are interested in, contact them to find out how to enroll with them and what you need to bring to open an account. Depending on your age, you may need to have a joint account with a trusted adult or parent.

Preparing to Pay Taxes

Filing taxes for the first time can be intimidating, so it’s definitely ok to ask for help! Some teenagers have to file taxes, and others don’t depending on where you earn money from and how much you earn per year. 

In order to file taxes, you will need to wait to file until you receive a W-2 form from your employer that shows how much money was withheld from your paycheck for federal and state taxes. Filing taxes serves two purposes: (1) it allows you to recoup money that you paid in taxes and (2) it helps you to start the habit of filing taxes and learn how to do so while your tax return is still relatively uncomplicated. 

Saving and Investing From Your Paycheck

The amount or percentage for savings and investments changes based on your situation, but most financial experts agree that saving at least 10% of your paycheck is a great goal to strive for because this is an amount that helps set a savings goal without crippling your motivation. Head over to our teen savings article for more saving tips!

Investments are fun to learn about when you’re young, and you can play around with compound interest calculators to find out how much you can have invested for retirement at different ages based on how much you can save monthly. 

There are many different investments that you can explore, from Certificate of Deposit (CD) to Roth/Traditional IRA to 401k options. When I started investing, I spoke with financial professionals who were well versed in retirement planning and learned about their different investments. 

Those conversations helped me learn to ask the right questions when speaking to financial planners and taught me to make educated decisions about business. I encourage you to find a financial professional that you can trust to give solid advice and guidance.

Creating a Budget 

Teens that learn to not rely on their parents to cover them in the event of a financial emergency have a healthier relationship with money than those encouraged by their parents to rely on them to fix their problems. There is freedom in taking responsibility for your actions and learning from your mistakes, especially when it comes to money. 

Budgeting is another word that has gotten a bad name for itself because there is a common misconception about a budget being focused around what you can’t do/be/have in life, and people that dislike budgeting normally associate it with not being able to live life the way they want to.

Budgets give you the power to choose where your money goes, and you get to choose what you spend it on based on what you value. If you like going out to eat with friends, you can choose to spend your money on that. If you like taking trips instead, you can choose to spend your money on that. If your school has a dance or event, you can choose to go or not. Keeping track of where your money goes by using a budget allows you to experience peace around your finances. You know where your money is going, and you know how much you have set aside for emergencies or major purchases like a car or college tuition.

Choose how often you will budget based on how many paychecks you will receive per month. As a freelancer and business owner, I get paid daily sometimes, which can be hard to set a budget that often, so I set my budget once per month and pay my bills on the 1st of the month. 

Feel free to experiment with budgeting during different increments of time to see what works for you! And the amounts that you budget for each line item will change based on your lifestyle and as your life changes over time. 

Items to include in your budget as a teen:

  • Fuel for vehicle
  • Car insurance
  • Cell phone
  • Entertainment
  • Dining out/snacks
  • Lunch at school
  • Clothes
  • Trips or school activities
  • Car payment (if this applies to you)
  • Savings
  • Investments

What else can you think of to add to this budget?

Success Tips for Staying Organized

  1. Set S.M.A.R.T. goals. You can set goals that are specific, measurable, attainable, realistic, and time-based. Setting goals allows you to have a plan for what to do with your money and set milestones to achieve those goals.
  2. Write it down. Whether you use a budgeting and personal finance app on your phone or use a pen and paper to track your expenses and money spent, write down how much money you have coming in, what bills or expenses you have to pay, and a plan for any “leftover” money if you end up not spending what you thought you would that month. 
  3. Ask for help. No one expects you to budget your first paycheck perfectly, and it’s ok to make some mistakes. Sit down and have open conversations with your parents and other adults about how to budget your money, ask how they budget their money, or handle different financial challenges in their lives.
  4. Look for discounts. As a student, you may qualify for discounts on purchases or bills if you show your student ID. My car insurance company offers a student discount, and some stores I shop at offer a 10% discount to students with ID. This will help you get into the habit of asking for discounts and helps you to save money on purchases!
  5. Send money to savings or investments automatically. Talk to your employer or your bank about having a percentage of your paycheck sent to savings or investments automatically as soon as you get paid. This will get you into the habit of setting money aside, prevent the temptation to spend all of your money as soon as it hits your account, and set you up for future financial success by giving you the power of compound interest over time.
  6. Spend money based on your values. One thing that I have learned as I have gotten older is that I don’t enjoy everything, and spreading myself too thin financially really stresses me out! I have gotten into the habit of asking myself before spending money if this purchase is in alignment with my personal values. For instance, I bought camping chairs this morning at Walmart for $12 and am sitting on my front porch to write this on those camping chairs. If I didn’t like camping or being outdoors, buying camping chairs wouldn’t have been a smart purchase for me. 

Getting your first paycheck as a teen is one of the most exciting times of life, and we are so excited for you! Now is the perfect time to set yourself up for success by establishing money habits and goals! Budgeting gives you the opportunity to track your expenses and monitor where your money is going. That’s it for now. Make sure to read our guide on how to read your paycheck (with examples) too!

About the Author

Jessica Anglin

Jessica was raised in a household where her parents didn't know how to pay bills on time and indulged in life's pleasures on a consistent basis in order to cover the misery from working jobs they hated for money that wasn't enough to live off of. She took on the role of caregiver to 4 siblings at age 15 and started her first business selling tie-dye t-shirts in order to buy food and provide a stable home. Nineteen years later, she owns three successful businesses, has earned an MBA in Finance, and works daily to set an example for the next generation on how to build wealth so they never face the same struggles.

Last updated on: November 29, 2022