Getting a part-time job is exciting for teens. Not only do they get to earn their own money, but they get to experience something completely different from school. It may also be the first time they’ll receive a paycheck.
As few of us receive a physical paycheck these days, it’s important to regularly review the information on a paycheck stub. However, research from the Workforce Institute has found that 42% of Americans find their pay stub hard to read. The good news is it's easier than you think to explain how to make sense of this document and help your teenager understand why it's so important.
Related: Financial literacy for kids
What is a paycheck?
A paycheck stub is a summary of your earnings and deductions. It contains information on your gross and net pay, state and federal taxes paid and other deductions made — like health insurance premiums and pension contributions.
Your gross pay is the total amount of money you earn before taxes and deductions. Your net pay is the amount you receive once all the deductions have been made.
Not everyone gets a pay stub when they get paid. The Fair Standards Labor Act (FSLA) requires employers to keep records of their employees’ wages and hours worked. However, they’re not required to share this information with employees. But while it may not be federal law, many states require employers to provide pay stubs at least once a month.
The information required on a pay stub depends on the employment laws in your state as well as the industry you’re in. But whether your teen receives a physical or digital pay stub, understanding this information is crucial to managing their money. They can track their net pay and use it to create a budget for spending and saving.
It’ll also help them spot any errors. Regularly reviewing their pay stub means they can check they’re getting paid what they should be, and that they’re paying the correct amount in taxes.
Paycheck stubs are also important because:
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A paystub provides proof of their earnings.
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When they are adults, they’ll need paystubs when applying for a mortgage or looking to rent a property.
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They’ll also need a payslip as proof of earnings for future loans.
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Pay stubs make filing taxes easier. Your last pay stub of the year shows how much income you earned and what you paid in taxes. It also proves your health benefits.
"At GoHenry, we believe in giving young people practical learning tools to develop the skills and knowledge they need to manage their money effectively in adulthood. It's one of the reasons we have introduced a payslip session in our induction program for our younger staff to help them understand what payslips show them about their earnings."
Louise Hill, COO and Co-Founder of GoHenry
Payslip glossary
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Name/number — below your name is the number an employer assigns to each employee working at the company.
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FED/FIT/FITW — federal tax deduction codes. The number in this box shows your filing status (single or married).
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State/SIT/SITW — state tax deduction codes. The number in this box shows your filing status (single or married).
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OASDI/FICA/SS/SOCSEC — social security payments. These are mandatory taxes paid to fund the Social Security program which provides retirement and disability benefits to US citizens.
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MED — Medicare taxes. These fund the Medicare Hospital Insurance program which provides health insurance for people aged 65+ with disabilities.
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FSA/HSA — health savings
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401K— retirement plan
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Pay period — the period in which your earnings are tracked and paid. In a payroll period, the taxes deducted usually include social security and Medicare taxes.
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Issue date — the date you are paid during this pay period.
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Warrant number — the check number issued by your State Controller’s Office
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District/pay location — your home address. If you move, update your address. It’s important your current pay stub matches your most recent W-2.
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Leave balance — information about your job including vacation and sick leave days taken
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Gross earnings — total hours worked and wages earned for the pay period and year to date
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Deductions —federal and state taxes deducted for the pay period and year to date. Columns show the amounts before and after tax deductions. If you signed up for retirement savings or life insurance through your employer, these contributions are listed here.
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Summary — summarizes the information on the pay stub including the portion of benefits paid by your employer.
Related: Explaining tax to kids
Pay stub FAQs
Does everyone get a pay stub?
Although employers aren’t required to provide pay stubs under federal law, some states do require it. The following states currently (2022) don’t require employers to provide employees with a statement of pay information:
Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Ohio, South Dakota. Tennessee.
Are employers legally obligated to provide a payslip?
It varies from state to state. It’s best to check pay stub requirements in your state.
When do people receive their pay stubs?
Pay stubs are usually sent a few days before being paid or may be given on payday.
Are teens entitled to ask for a paper payslip?
It depends on the law in your state. Not all states require employers to provide pay stubs for employees.
How long should your teen keep hold of their pay stubs?
Pay stubs should be kept for at least a year or until they’ve been checked against your teen’s Form W-2. Holding on to pay stubs will help with payment issues, from a mistake in salary to paying too much tax. Your teen's payslip is proof of what payments have been made and taken from them.
What should your teen do if they think their payslip might be incorrect?
If your teen thinks there’s a mistake on their paycheck, they should report it right away. The best person to tell depends on the size of the company. If there’s a payroll manager, your teen should go to them with the issue. Otherwise, it might be a matter for HR or if the firm’s a small one, their boss.
Your teen should provide their pay stub as evidence and ask for an explanation. It may be they’ve simply misunderstood a calculation. If there is an issue, the problem should be rectified immediately. If there’s a shortfall, their employer should pay what’s owed straight away as well as cover any financial charges your teen had to pay as a result of the payroll error.
What’s the difference between pre-tax and post-tax deductions?
Employers make some deductions before tax is taken from your paycheck. Other deductions are taken when tax has been withheld.
Pre-tax deductions include benefits like health plan contributions, retirement contributions, dental plans and medical expenses. These deductions benefit employees because they reduce your taxable income. (In other words, you’ll pay less tax.)
Employees can usually choose whether or not they want to opt into post-tax deductions. These don’t reduce the amount of tax you pay, they reduce your paycheck. Post-tax deductions include wage garnishments like 401(K) plans, 529 college savings plans and charitable donations.
How can kids save and spend the money they earn?
GoHenry teen debit cards for 14-18-year-olds come with their own account number and ABA or routing number. This means earnings can be paid directly into your teen's account. They can then use the GoHenry app and card to budget, track, save and spend the money they earn. The in-app Money Missions can also help further their financial know-how with bite-sized lessons on investing and making the most of their money.
