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Your teen has been hired at his or her first job—and everyone is excited. One of the first financial decisions your kid will have to decide on is whether they’d like to receive compensation by direct deposit or as paper paychecks.
While this is inevitably your teen’s decision, your guidance can help to give him or her healthy financial management skills.
Direct deposit is likely your go-to choice for receiving employment compensation. However, it’s not necessarily the optimal choice for your teen.
Through direct, your teen has reduced temptation for careless spending. Since money goes directly into their bank account, your teen will not be as tempted to spend their hard-earned money. Your teen can also set aside a portion of every paycheck to be deposited in a savings account, making responsible saving easy.
While paper paychecks can initially seem like a hassle, they’re a great way to teach financial responsibility. Every paycheck becomes an opportunity for your teen to make a decision between spending and saving.
Physical paychecks have the added benefit of making it easy for your teen to evaluate the structure of payments, including the various withholdings from each paycheck.
The major drawback of paper paychecks is simply the inconvenience factor of having to deposit every check yourself.
While both methods have benefits and drawbacks, regardless of which delivery method your teen opts in to, it is important to for him or her to be educated in payment structures and responsible about money management and savings.