The Summer Job: A Money Boot Camp For Teens

The best experience for older children to learn some real-world money skills is to work a summer job. And the prospects for getting a summer job this year , while still challenging, look a little brighter than last year.

Managing spending and savings is a contact sport. You learn it by doing it. I advise parents to have their kids work summer jobs for a few years before they leave home. This teaches them about a lot of things we often take for granted; like tax withholding allowances, how to fill out the W-4, FICA tax, basic banking and depositing of paychecks. They also learn about spending money and preparing their tax return. In short, having a job and earning money is a way to interact with money, the financial system and basic financial products.

Saving for Education Extras

If you have a teen going off to college this fall, you and they will need to start planning and saving for all of those out-of-pocket costs that can really add up. Extra cash from a summer job can help with this.

These costs include things like books, a computer, printer, supplies, additional meals, laundry, cell phone, travel home, entertainment and sports fees. There are also unanticipated expenses such as a refrigerator, microwave oven, room furniture and the inevitable car repair, parking tickets or trip to the infirmary or ER. Most students need to save up $2000 to $5000 in cash to get through the school year. I advise parents and their students to work up a college spending budget for these extra costs, listing each category of expenses and targeting a total amount they'll need for the year. There are many student budget calculator tools available online to help guide you.

Credit Cards on Campus

Up until recently, in their first semester of college, students were offered an average of eight credit cards. Many of these offers are made on campus, through targeted marketing campaigns that offer free gifts. Credit card issuers would get the list of student's names and the use of the college logos on the cards in exchange for sharing a slice of the fees with the school from student's use of credit.

Hopefully that's changing. According to the CARD ACT of 2009, as of Feb. 22, 2010, credit card marketers must stay at least 1,000 feet from college campus if they are offering freebies in exchange for signing up for credit cards. The new law also restricts people under 21 from getting new credit card accounts on their own unless they get co-signers or show they have the means to pay the bill.

This doesn't mean students will not be offered credit cards on campus. Credit cards will still be offered indirectly as part of a marketing promotion for banking accounts. And students under age 21 do not have to have a parent co-sign for the card. They can ask an older sibling or friend.

The challenge is that most high schools and colleges do not provide students with courses on how to use properly use credit cards and the skills they'll need for basic financial management. And while there are some schools where these classes are available, they are electives, not requirements.

Check back in a few days and I'll write about a few of the financial decisions that confront students and their parents.

Ray Martin

View all articles by Ray Martin on CBS MoneyWatch»
Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.

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