We all remember getting our first PAYCHECK! Oh. My. Goodness! It was like you were on top of the world and you could just feel the independence making its way through your veins.
I still laugh thinking about those early days when my friends and I would take our paychecks and run to The Wherehouse to check out the latest CD releases (yes, I’m totally dating myself here). Then it was off to Taco Bell or Carl’s Jr. (aka the West Coast Hardee’s) to grab a snack our 40-year-old selves would probably faint over now.
Fast forward to today, it’s the month of May and that means graduation season is in full swing! Whether it’s finishing up high school or college, this is a huge milestone for your kids. And for many, this also marks the beginning of their working years and those first paychecks!
While it’s always exciting seeing that deposit hit the bank account, understanding the pay stub can be confusing in the beginning. Taxes, benefits, deductions – it can be a lot to take in. Helping your grad make sense of it all is an essential first step in building their financial confidence.
Here are 3 key areas to help them understand their paycheck and build a strong financial foundation from the start:
GROSS vs. NET PAY
WHAT?
Gross pay is the total amount earned, while Net pay is what gets deposited in the bank after taxes and deductions.
IMPORTANCE:
Creating a solid money plan and budget should always focus on NET pay, so you don’t overspend.
ACTION STEP:
Review their paycheck stubs with them, so they can understand each element and create a budget.
TAXES
WHAT?
Each paycheck will show deductions of state and federal taxes, along with Social Security and Medicare deductions.
IMPORTANCE:
Understanding these deductions will help when it comes to planning and filing their taxes.
ACTION STEP:
If they plan to move out of state after graduation, use online paycheck calculators to estimate their NET pay for various jobs.
BENEFITS
WHAT?
Paychecks might show deductions in health insurance premiums and retirement savings, like an employer-sponsored 401(k) plan.
IMPORTANCE:
Though these reduce their paychecks, they’re valuable benefits that contribute to their security.
ACTION STEP:
Encourage your grad to contribute at least up to the employer match to their 401(k). It’s FREE money!
“I wish I knew [this] back then!”
Think back to your early days of working:
- Was your pay stub explained to you when you first started?
- Did you fully understand everything it showed, so you could confidently file taxes and take advantage of employer benefits?
- What you know NOW is what your grad needs to know today!
Start the conversation and make it a “Money Date”
Over a coffee or lunch, focus on showing your grad what’s possible when they understand their pay stub and make a plan for their hard-earned money. Keep the conversation light, positive, and inspiring—it’s all about helping them see the power behind smart money moves.
And an important reminder: This isn’t the time to focus on “Don’t spend here” or “Don’t waste money there.” Leading with restriction can make money feel like a burden rather than a tool. Instead, aim to keep the conversation positive and empowering.
This is the time to help your grad build a healthy, confident mindset around money as they take their first steps into financial independence.
Need Guidance?
My “Money Alignment Plan” session is perfect for both adults and recent grads. It’s designed to help you align your money with your lifestyle and goals, because when your finances reflect what matters most to you, everything feels more intentional. And remember, it’s never too early to start building strong, healthy money habits!
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