Lesson P202.7 · Personal Finance 202: Lead Your Family
Teaching kids about money
6-minute read · Figures for tax year 2026
Photo: Towfiqu barbhuiya / Pexels, Pexels License
The short answer
Start early, keep it simple and let them handle real money. Little kids learn save, spend and give with three jars. Older kids earn money and make choices with it. Teens open an account, fill out a W-4 for their first job and read their own pay stub. Before 18, talk about credit card offers and the scams aimed at young people.
What to teach at each age
| Age | What to teach | Try this |
|---|---|---|
| 3–5 | Money buys things, and sometimes you wait | Three clear jars: save, spend, give |
| 6–12 | Earning, choosing, saving for a goal | Pay for chores or a set allowance; a goal picture on the fridge |
| 13–17 | A bank account, a paycheck, taxes, scams | Open an account together; read the first pay stub together |
| 18 and up | Credit offers, rent, a budget of their own | Talk through a card offer before the first one arrives |
Paying for chores and giving a set allowance both work. Some families pay for jobs done. Others give an allowance and expect chores as part of living in the house. Pick one, write down the rules and stick with them.
Let kids see your work, too. Show them a lot your crew sealed and striped, from a safe spot, and tell them what it took. A kid who knows what a long day in July feels like understands a paycheck differently. For teens drawn to the trades, the mikeroweWORKS Foundation helps people train for skilled jobs, and its Work Ethic Scholarship asks applicants to sign its S.W.E.A.T. Pledge.
A teen's first job: the W-4 and the paycheck
The W-4 tells the employer how much federal income tax to take out of each check. Sit down and fill it out together.
- Claiming exempt. For 2026, a teen can claim exempt only if they owed no federal income tax for 2025 and expect to owe none for 2026. It covers federal income tax only. It lasts one year, so a new W-4 is due by February 16, 2027 to keep it.
- What still comes out. Social Security (6.2%) and Medicare (1.45%) usually come out of every check, exempt or not.
- Filing. If income tax was taken out, filing a return is how your teen gets it back. IRS Free File covered adjusted gross income of $89,000 or less in the 2026 filing season.
- Side work. If your teen works for themselves, mowing or pressure washing driveways for neighbors, and nets $400 or more in a year, they must file and pay self-employment tax. Cash counts.
Example (made-up numbers). Jada, 16, earns $300 a week at a summer job. She owed no federal income tax last year and won't this year, so she claims exempt. Her stub shows $18.60 for Social Security and $4.35 for Medicare, $22.95 in all, leaving $277.05 before any state tax. She and her mom read it line by line.
Working on a crew has rules too. Federal law limits the hours 14- and 15-year-olds can work and keeps them out of most construction. Under 18, nobody can do jobs the Labor Department calls hazardous, such as most trenching and excavation and most driving on public roads for work. Your state may be stricter. If you own the business, hiring your own kids has its own tax rules, so ask your tax pro.
Credit offers and scams
The offers start around 18. Under federal rules, a card issuer can't open an account for someone under 21 unless they show their own ability to make the minimum payments or have a co-signer who is 21 or older. If you co-sign, the debt is yours too.
Scams find teens fast. The FTC says never pay for the promise of a job. A "job" that sends a check and asks your teen to send part of it back, buy gift cards or reship packages is a scam. Betting apps are built to keep you playing. Talk about them early, before an account is a few taps away.
Different approaches
Where respected teachers differ
Credit cards for people who pay in full. Everyone agrees: if you carry a balance, stop using the card and pay it off. Dave Ramsey teaches that nobody needs a credit card and that rewards are designed to make you spend more. Others say a card paid in full every month is fine. If you keep one, treat it like a debit card: never charge more than you have in the bank, and autopay the full balance.
Building a credit score or living without one. Dave Ramsey teaches you don't need a credit score. Many landlords, utilities and insurers check credit, so others suggest building a score without paying interest. Either way, never borrow just to raise a score.
Your Move
Do this week
- Set up three jars or three accounts: save, spend and give.
- Decide how money comes in, chores or allowance, and write the rules down.
- Agree on the split with your kids, and let them pick what to save for and where to give.
- Teen with a job? Fill out the W-4 and read the first pay stub together.
Log it: Started save, spend and give.
Common questions
Should I pay for chores or give an allowance?
Both work. Pick one, write down the rules and stick with them.
Can my teenager claim exempt on the W-4?
Only if they owed no federal income tax last year and expect to owe none this year. It covers federal income tax only and lasts one year.
When can my kid get a credit card?
Before 21, only with proof of their own ability to pay or a co-signer who is 21 or older. Whether to get one at all is a choice respected teachers differ on.
Watch out for
- Job offers that ask your teen to pay to get hired, deposit a check and send money back, buy gift cards or reship packages.
- Co-signing a first card. You'd be on the hook for the balance.
- Betting apps. Free, confidential help: call or text 1-800-MY-RESET (1-800-697-3738).
Free help
- CFPB: Money as You Grow, activities and conversation starters by age
- IRS: Form W-4 (2026) and the Tax Withholding Estimator
- IRS Free File
- Labor Department: Child labor rules, Fact Sheet #43
- FTC: Job scams
- mikeroweWORKS Foundation
Free practice
Lesson check
5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.
This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.
Sources
- CFPB: Money as You Grow
- IRS: Form W-4 (2026)
- IRS: Topic 751, Social Security and Medicare withholding rates
- IRS: Publication 501, who should file
- IRS: Topic 554, Self-employment tax
- IRS: Reporting all income, including cash
- IRS: Free File
- Labor Department: Fact Sheet #43, child labor in nonagricultural jobs
- CFPB: Regulation Z, 1026.51, rules affecting young consumers
- FTC: Job scams
- FTC: Cosigning a Loan FAQs
- Ramsey Solutions: Excuses to keep credit cards
- Ramsey Solutions: No credit score, no home?
- National Council on Problem Gambling: 1-800-MY-RESET
- mikeroweWORKS Foundation: Work Ethic Scholarship