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young money

Alyssa Dobie, 17, and her mom, Kelsey, a medical lab assistant at Penticton Regional Hospital, stand outside of the hospital together in Penticton, B.C., on Sept. 1.The Globe and Mail

On the heels of a sizzling summer jobs market, some teenagers will be starting the school year having earned some serious cash. So how should teens approach spending – and hopefully saving – some of that hard-earned money?

Seventeen-year-old Megan Bannerman worked at a Canadian Tire in Stratford, Ont. She was hired two years ago and she’s had three raises since then. This year, they even gave her stock options. She worked so much this summer that her parents asked her employer to reduce her number of shifts.

Her brother, 18-year-old Caleb Bannerman, knew he would be working long hours when he took on two jobs this summer as a lifeguard at the Stratford YMCA and a local quarry. However, he wasn’t expecting to work up to 60 hours a week.

In Penticton, B.C., Alyssa Dobie, 17, worked at a White Spot restaurant for the summer. According to Kelsey Dobie, her mother, “They basically told her she could work as much as she wanted to – that’s how short-staffed they are.”

The demand for teenage workers is so high that the unemployment rate for youth aged 15-19 was 11.8 per cent – the lowest summer number for this age group since 1988, according to Statistics Canada.

And with minimum wages rising, some teens are closing out the summer with sizable earnings. In Ontario, for example, the minimum wage rose this year to $15 an hour. Wages for Ontario students under the age of 18, who work 28 hours a week or less when school is in session or work full time during a holiday break, hit $14.10 an hour. That means an Ontario teen working five eight-hour days a week, for nine weeks would have a gross summer income of $5,076.

Of course, teens who were paid more than the minimum wage or worked overtime earned far more. So, what should teens do with their summer windfall?

Many teens will want to spend their earnings on things they want – like phones, clothes and going out. Janine Rogan, a keynote speaker who holds the chartered professional accountant (CPA) designation, says it’s okay for teens to live it up a little: “It’s important that they learn to spend money on things they enjoy and experiences that create happiness.”

Although there is no hard and fast rule, Ms. Rogan encourages teens to save anywhere between 10 to 30 per cent of their paycheques – or more – if they are saving for postsecondary education.

Summer jobs are a way for parents to teach teens solid money management skills, says Robin Taub, also a CPA, and author of The Wisest Investment, a book that helps parents build healthy financial foundations for their kids.

Ms. Taub says that now is a great time to help teens make a simple budget for the school year ahead: Encourage them to put a portion of their savings towards a future goal they may have, like going to university or travelling after high school.

She adds it’s important for parents to be positive financial role models. “Your kids and teens will take notice and learn from your behaviour with money.”

It’s also an opportunity for them to learn the importance of having a plan. “If your teenagers overspend on entertainment or food and are short on money the next time they are planning to go out with friends, don’t bail them out,” Ms. Taub says, adding that they will soon understand that money is a finite resource.

Brendan O’Neil, father of two teen boys, 15 and 18, in Oakville, Ont., says he’s using this summer to talk about budgeting. Eighteen-year-old Brayden is responsible for his food budget when he’s away at university. “We went through what a typical grocery budget might look like so he could think it through and plan ahead,” Mr. O’Neil says. Now that he knows how much he’ll likely be spending on food each week, he can budget for things he wants, such as tickets to see rapper Kendrick Lamar.

Many teenagers likely already have a savings account at a bank, which can be a good place to park their shorter-term savings. For those choosing a bank account or considering changing banks, it’s worthwhile to do some online research and compare bank fees, the number of free debit transactions you get each month, online convenience and whatever other features you value at a bank.

Most accounts for children and students do not charge monthly fees, but the interest Canada’s big banks offer on the deposits in these accounts is often negligible so it’s worthwhile to shop around and check out the alternative banks, where the interest paid can be much higher.

Ms. Taub says parents should consider setting up a high-interest savings account for their kids as a good short-term place to stash their money. HISAs are attractive because they offer higher interest rates than a standard savings account. You can take advantage of the power of compound interest and still have total flexibility to add or withdraw from the account, she adds.

For longer-term savings, guaranteed investment certificates are a safe and secure investment option, she says. Parents will need to open one on their child’s behalf, or the teen can do it themselves once they reach 18.

While GICs provide a guaranteed rate of return, they are not liquid, says Ms. Taub. That means you usually can’t get your money before the end of the term without incurring penalties or forfeiting any interest earned, she says.

For those who like to plan even further into the future, Ms. Rogan recommends opening a registered retirement savings plan. Teens can open an RRSP at any time – as long as they can provide a letter of consent from their parent or guardian.

Once they turn 18, Ms. Rogan says they can move some money over from their savings account into a tax-free savings account. Before 18, the RRSP would be their only option for a beneficial tax account for investing.

She also notes that teens can carry forward the accompanying RRSP tax deduction to a time down the road when they are earning more money.


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