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I'll be starting work this Friday (yay!) and haven't got the slightest clue about any of this.

It'll be washing dishes at a restaurant, and I really don't know anything. Do I set up a bank account now, does it cost money to setup, what about taxes? Should I save for my future? If so, how much. Any good articles on saving for the future?

I assume I'll be going to college next year.

I live in Ohio. I do have a car, and my only hobbies aren't expensive unless you let them be. Currently living with parents and in high school, so a large amount of expenses will be covered. I am covered under mom's insurance even if I live with her until age 25 (no...not gonna do that).

  • Are they paying you under the table or taking taxes out? I have had many of jobs washing dishes and it was under the table. You should get a bank account regardless. If they are paying you under the table, it is your responsibility to pay the income taxes and so you will have to keep track of your pay so you can pay social security taxes and medicare taxes that normally would be taken out of your paycheck. – Brian Jul 17 '14 at 17:43
  • I'll be finding out tomorrow or Saturday when I actually start working. It was a brief interview, not much time for questions; from what I understand they interviewed many people after me, but I was the first (setting the bar, I guess). – user19092 Jul 17 '14 at 18:23
  • I got my first bank account long before I had a job -- it's where I put the portion of my allowance, birthday gifts, and so on that I didn't immediately spend. Seriously, if you have money you want a bank account. – keshlam Jul 19 '14 at 3:19
  • Alright. Last night was my first night and I made a total of...$47. That's half of what I had before (a mere 100). Feels good. Thanks for the advice veryone – user19092 Jul 20 '14 at 0:29
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This may be a bit advanced now, but once you start really working and get a place, I think this will apply more...

Do I set up a bank account now?

Yes. There is no reason not to. As an adult you will be using this much more than you think.

Assuming you have a little money, you can walk in to any bank almost any day of the week and set up an account with them in very little time. Note that they may require you to be 18 if your parents won't be with you on the account. Otherwise, just ask any bank representative to help you do this.

Just to be clear, if you can get a credit union account over a typical bank account, this is a great idea. Credit unions provide exactly the same financial services as a normal bank, but typically have variety of advantages over banks.

Bank Account Parts

Bank accounts typically have two parts, a checking account and a savings account. Your checking account typically is what you use for most day-to-day transactions and your savings account is generally used for, well, saving money.

Having a bank account often gives you the following advantages:

  • They give you an ability to store money without having large amounts of cash on hand. Once you start working regularly, you'll find you won't want to keep ~$600+ cash every two weeks in your wallet or apartment.

  • They help you pay bills. When you set up your bank account, you will likely be able to get a Visa debit card which will process like a regular credit card but simply deduct funds from your checking account. You can use this card online to pay utilities (i.e. electricity and water), general bills (e.g. your cell phone and cable), purchase items (ex. at Amazon) or use it in stores to pay in lieu of cash.

    Be aware -- some banks will give you an ATM-only card before they send you the Visa debit card in the mail. This ATM-only card can only be used at ATMs as it's name implies.

    Similarly, if you can invest about ~$200 to build your credit, you can often get a deposit secured credit card attached to your account (basically a credit card where the bank keeps your money in case you can't pay your bill). If you treat this card with responsibility, you can eventually transition to an unsecured credit card.

  • They save you hassles when cashing your check. If you don't have a bank where you can cash your check (e.g. you don't have an account), you will likely be charged check cashing fees (usually by places such as grocery stores or payday loan chains, or even other banks). Furthermore, if your check is over a certain amount, some places may refuse to cash your check period and a bank may be your only option.

  • They give you a way to receive money electronically. The most common example of this is direct deposit. Many employers will send your money directly to your bank account instead of requiring you to cash a check. If they are prompt, this money gets to you faster and saves you trouble (on payday, you'll just receive a pay stub detailing your wages and the amount deposited rather than a check).

    Also, since you asked about taxes, you should know that when you do eventually file with the IRS, they have an option to receive your tax refund electronically as well (e.g. direct deposit into your bank account) and that can literally save you months in some cases depending on when you file your return and how many paper checks they have to process.

Does it cost money to setup?

It depends. Some banks have special offers, some don't. Most places will set up an account for free, but may require a minimum deposit to open the account (typically $50-$100). The Visa debit card mentioned above generally comes free.

If you want a secured credit card as above, you will want about an additional $200 (so $250 - $300 total). Note that this is absolutely NOT required. You can exclusively use the Visa debit card above if you wish.

Bank Account Fees

Any fees charged when you have a bank account are usually minor anymore. Regardless, the bank will hand you a whole bunch of paperwork (mostly in legalese) detailing exactly how your account works. That said, the bank person helping set things up will cover what you need to know about keeping the account in plain English.

The most common types of fee associated with a bank account are monthly maintenance fees and overdraft fees, but these aren't always necessarily charged. Likewise, there may be some other fees associated with the account but these vary from bank to bank.

Monthly Maintenance Fees

To give some examples...

  • Some banks may only charge a monthly maintenance fee if your balance goes below a minimum threshold (usually $25-$100).
  • Some banks may not care about a minimum balance but charge you a flat rate (e.g. $8.95 a month to keep the account open, regardless of balance).
  • Some banks may put additional conditions in place regarding monthly fees (e.g. no maintenance fee as long as you go online and do your banking via ATM and direct deposit -- but if you visit a teller one or more times in a month, they charge your account $10 for that month).

Overdraft Fees

Overdraft fees are typically charged when you attempt to spend more money than you have in your bank account and the bank has to cover these charges. Overdraft fees typically apply to using paper checks (which it is unlikely you will be using), but not always.

That said, it is very unlikely you will be charged overdraft fees for three reasons:

  • Many banks have done away with these fees in lieu of other ways of generating revenue.

  • Banks that still charge these fees usually have "overdraft protection" options for a little more money a month, effectively negating the possibility you will be charged these fees.

  • The ability to deduct an amount of money from your checking account is now typically checked electronically before the payment is authorized. That is, using a Visa debit card, the card balance is checked immediately, and even when using paper check, most retailers have check scanning machines that do roughly the same thing.

On a personal note, the bank that I have allows my account to be deducted below my checking account balance only if the payment is requested electronically (e.g. someone who has my card information charges me for a monthly service). In this case, the funds are simply listed in the negative and deducted from any amount I deposit till the proper amount is repaid (e.g. if I'm at -$25 dollars due to a charge when my account balance was $0 and then I deposit $100, my available balance will then be $75, not $100).

Finally, per the comment by @Thebluefish, while I minimize the likelihood you will be charged overdraft fees, it is good to check into the exact circumstances under which you might be charged unexpectedly by your bank. Read the documentation they give you carefully, including any mailed updates, and you'll reduce the chance of receiving a nasty surprise.

For reference, here are some of the fees charged by Bank of America.

What about taxes?

When you begin working, an employer will usually have you fill out a tax form such as a W-4 Employee's Withholding Allowance Certificate so that your employer can withhold the correct federal income tax from your wages. If they don't, then it is your responsibility to calculate and file your own income taxes (if you are self-employed, an independent contractor or paid under the table).

If your employer is reputable, they will send you additional information (generally in February) you need to properly file your taxes prior to April 15th (the IRS tax deadline for most people). This additional information will likely be some variation of a W-2 Wage and Tax Statement or possibly a Form 1099-MISC.

Do I have to worry about money in my bank account?

Unless you have a significant amount in your bank savings account earning interest (see "Should I save for the future?" below), you won't have to pay any sort of tax on money in your bank account. If you do earn enough taxable interest, the bank will send you the proper forms to file your taxes.

How do I file taxes?

While it won't apply till next year, you will likely be able to fill out a Form 1040EZ Income Tax Return for Single and Joint Filers With No Dependents, as long as you don't have any kids in the meantime. ;-) You will either mail in the paper form (available at your local IRS office, post office, public library, etc.) or file electronically. There will be a lot of information on how to do this when the time comes, so don't worry about details just yet.

Assuming your all paid up on your taxes (very likely unless you get a good paying job and take a lot of deductions throughout the year on your W-4), you'll probably get money back from the IRS when you file your tax return.

As I mentioned above, if you have a bank account, you can opt to have your refund money returned electronically and get it much sooner than if you didn't have a bank account (again, possibly saving you literal months of waiting).

Should I save for my future? If so, how much? Any good articles?

Yes, you should save for the future, and start as soon as possible. It's outside the scope of this answer, but listen to your Economics professor talk about compound interest. In short, the later you start saving, the less money you have when you retire.

Not that it makes much difference now, but you have to think that over 45 years of working (age 20-65), you likely have to have enough money for another 20+ years of not working (65-85+). So if you want $25,000 a year for retirement, you need to make ~$50,000 - $75,000 a year between your job and any financial instruments you have (savings account, stocks, bonds, CDs, mutual funds, IRAs, job retirement benefits, etc.)

Where you should stick money your money is a complicated question which you can investigate at length as you get older. Personally, though, I would recommend some combination of IRA (Individual Retirement Account), long term mutual funds, and some sort of savings bonds.

There is a metric ton of information regarding financial planning, but you can always read something like Investing For Dummies or you can try the Motley Fool's How To Invest (online and highly recommended).

But I'm Only 17...

So what should you do now?

  • Budget. Sounds dumb, but just look at your basic expenses and total them all up (rent, utilities, phone, cable, food, gas, other costs) and divide by two. Out of each paycheck, this is how much money you need to save not to go into debt.

  • Try to save a little each month. $50 - $100 a month is a good starting amount if you can swing it. You can always try to save more later.

  • Invest early. You may not get great returns, but you don't need much money to start investing. Often you can get started with as little as $20 - $100. You'll have to do research but it is possible.

  • Put money in your savings account. Checking accounts do not typically earn interest but money in savings accounts often do (that is, the bank will actually add money to your savings assuming you leave it in there long enough). Unfortunately, this rate of interest is only about 3.5% on average, which for most people means they don't get rich off it. You have to have a significant amount of money ($5,000+) to see even modest improvements in your savings account balance each month. But still, you may eventually get there. Get into the habit of putting money places that make you money in the long run.

  • Don't go into debt. Don't get payday loans, pawn items, or abuse credit cards. Besides wrecking your credit, even a small amount of debt ($500+) can be very hard to break out of if you don't have a great paying job and can even make you homeless (no rent means no apartment).

    Remember, be financially responsible -- but assuming your parents aren't totally tight with money, don't be afraid to ask for cash when you really need it. This is a much better option than borrowing from some place that charges outrageous interest or making your payments late.

  • Have an emergency account. As already mentioned in another excellent answer, you need to have money to "smooth things out" when you encounter unexpected events (your employer has trouble with your check, you have to pay for some sort of repair bill, you use more gas in your car in a month than normal, etc.) Anywhere from $200 - $2000+ should do it, but ideally you should have at least enough to cover a month of basic expenses.

  • Build good credit. Avoid the temptation to get a lot of credit cards, even if stores and banks are dying to give them to you. You really only need one to build good credit (preferably a secured one from your bank, as mentioned above). Never charge more than you can pay off in a single month. Charging, then paying that amount off before the due date on your next statement, will help your credit immensely. Likewise, pay attention to your rent, utilities and monthly services (cell phone, cable, etc.). Even though these seem like options you can put off ("Oh my electric bill is only $40? I'll pay that next month...") late payments on all of these can negatively affect your credit score, which you will need later to get good loans and buy a house.

  • Get health insurance. Now that the Affordable Care Act (ACA a.k.a Obamacare) has been enacted, it is now simpler to get health insurance, and it is actually required you have some.

    Hopefully, your employer will offer health coverage, you can find reasonably priced coverage on your own, or you live in a state with a health exchange. Even if you can't otherwise get/afford insurance, you may qualify for some sort of state coverage depending on income.

    If you don't have some sort of health insurance (private or otherwise), the IRS can potentially fine you when you file your taxes. Not to be too scary, but the fine as currently proposed is jumping up to about $700 for individuals in 2016 or so. So... even if you don't grab health insurance (which you absolutely should), you need to save about $60 a month, even if just for the fine.

This answer turned out a bit longer than intended, but hopefully it will help you a little bit. Welcome to the wonderful world of adult financial responsibility. :-)

  • A very in depth answer that tells me what I wanted, but also tells me that it'll take me a lifetime to fully understand this sort of thing. Thank you, and one last question (hopefully you get to it before I turn in the form): on my W4, should I have "additional amount, if any, withheld from paycheck", and if so how much? – user19092 Jul 21 '14 at 3:59
  • @user19092 Quick answer: that's for if you know you will need to pay significantly more tax than usual (more than you're allowed to just ignore until you file your return). Leave it at zero unless you have a definitely unusual situation. – Kevin Reid Jul 22 '14 at 1:05
  • @user19092 I agree with Kevin Reid on this one -- just leave it at 0. This would simply be an additional amount they take from your paycheck each month for no good reason. For you, you will be getting little enough money on your paychecks as is. And while you would likely get this money back on your refund (since the total amount withheld would almost certainly will be larger than the taxes you owe), there is effectively no benefit to using the IRS as an ad-hoc bank. Stick it in your savings account. :-) – Anaksunaman Jul 22 '14 at 7:44
  • On the overdraft section, it's important to note that several large banks such as Chase and Bank of America (US banks anyways) still do charge a hefty overdraft fee, or an equivelant NSF returned item fee if the customer chooses not to overdraft (chase does not offer this option but may still decline larger transactions for the same fee). Though there is usually no issues with debit card related overdrafts, some banks are opt-in for this option. – Thebluefish Jul 23 '14 at 11:47
  • It is always good to check your bank policy regarding overdrafts, etc. As a point of reference, I have Bank of America, and have had no NSF fees charged within the last 3 years, despite some unexpected accounting errors (as stated, due to electronic automatic withdrawals). But this is a specialized situation. For instance, even though they don't charge me for this particular scenario, if my account is overdrawn for 5+ consecutive business days, they can issue an Extended Overdrawn Balance Charge. – Anaksunaman Jul 28 '14 at 11:30
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This is a topic you need to sit down and discuss with your parents.

Income taxes probably aren't going to be a big issue, and will be refunded in April. Social Security and Medicare will not be refunded, but start you on the road to qualifying for them in the future.

How much of you expenses you will now cover will be a family decision; how much of your college expenses you will be responsible for will also need to be discussed. These topics need to be understood before it is time to apply to schools in the fall of your senior year of high school.

It is nice to know that you are at least thinking about saving money for your future and for emergencies.

1
  • Ask your employer how they will pay your wages.
  • You'll eventually need a bank account in any case. You should be able to get a free checking account without any fees. Those are most often offered by credit unions, but also some other banks.
  • Taxes, I have no idea about the details in the USA. Your income taxes will automatically be deducted by your employer, and I think you need to file an income tax report once a year.
  • If you're yet to go to college, it may be a bit early to start saving for the future. One thing that is very useful to start saving for as early as possible is an emergency fund: at least one month of wages that you have available at any time to use only for emergencies, such as health problems, something important breaking (such as your car or refrigerator), etc.
  • get health isurance
  • "One thing that is very useful to start saving for as early as possible is an emergency fund" - Absolutely. I discovered this a little later in life and kicked myself for a long time over not having it sooner. Be diligent about replacing the money you "borrow" and this will save you much hardship (credit problems, transportation issues, going hungry, etc.) in the future. – Anaksunaman Jul 20 '14 at 11:01
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Other answers here cover some of the basics, but this is also a great time to start establishing a credit history and developing good financial habits to carry throughout your life.

  • In addition to opening a free checking account with the local credit union, establish an overdraft line of credit on that account. Never close this account or this line of credit as it will work to increase the average age of your accounts when you apply for credit later in life.

  • If you are disciplined with your use of credit cards, you may also want to apply for a low limit credit card through the same credit union for the same purpose as above. Never carry a balance on this card, but make minor purchases with it each month, never more than 20% of the balance, maybe just buy gas with it.

  • Start tracking all of your spending and make a monthly budget. There are a lot of online tools that make this very easy. Establishing the habit now will help you make informed financial decisions in the future.

  • Open a Roth IRA and put at least 10% of your money away for retirement. In the future your income may increase enough to put you in the 25% tax bracket. If that ever happens, open a Regular IRA and put the money there instead. Also when you have employers that offer 401k matching do the same thing with a Roth 401k account. Keep your money invested in a low cost index fund.

  • This is more complex than I had hoped. Why a credit union instead of a bank? How do I open an IRA and 401k? Should I even worry about this, being only 17 years old. – user19092 Jul 17 '14 at 17:23
  • Credit unions generally have lower fees, use a bank if you prefer. You can open an IRA account through any financial institution you want; it's not that much different than opening a bank account. The reason to do it now is that any money you put in at 17 years old has an extra 13 years to earn tax free returns at retirement vs. waiting until say 30 years old. 401k is an option that is employer specific, and you probably won't need to worry about it until you are older, but it's the same concept. Save at least 10% of everything you make, use these accounts if you want tax advantages. – Nathan L Jul 17 '14 at 19:44
  • And start working on good credit now. By the time you're finished with college you'll have 6 years of credit history! – Nathan L Jul 17 '14 at 19:47
  • The Roth mention is a great point. Every first-time earner should get the "Roth Lecture." – JoeTaxpayer Aug 11 '14 at 11:15

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