High School (Ages 15-18): First Paychecks, a Roth IRA, and the Sprint to Independence

High school is when money stops being practice. In July 2026, 36.5% of U.S. teens ages 16 to 19 had a job, according to the Bureau of Labor Statistics. That’s well below the July 1978 peak of 60.1%, but it still adds up to millions of first paychecks, first pay stubs, and first questions about where the rest of the money went. One in four employed 16- to 24-year-olds worked in leisure and hospitality that month, and another 18% worked in retail, the agency reported. Within a few years, the same teens will choose a college or a job, start getting credit offers, and may take control of accounts that have been growing in their name.

This guide is the fifth and final stage of The Age-By-Age Playbook to Financial Literacy. It picks up where Middle School (Ages 11-14) left off, with a first debit card, a first look at the stock market, and a yearly portfolio review, and it covers the four big jobs of ages 15 to 18: managing first paychecks, opening a Roth IRA, avoiding debt, and the final sprint toward financial independence. Think of these years as a dress rehearsal for adulthood: real money and real consequences, while you’re still close enough to help.

Why ages 15 to 18 matter for money

When the CFPB traced adult money skills back to childhood, it found that learning from direct, hands-on experience, which helps young people gain knowledge and practice financial decision-making, becomes most relevant from 13 to 21, the agency said when it released that research. High school sits in the middle of that window. It’s also the last stretch when your teen’s money mistakes are likely to be small, private, and fixable with you nearby.

Many young adults reach that point unprepared. In the 2026 TIAA Institute-GFLEC Personal Finance Index, a yearly survey of U.S. adults, Gen Z answered just 38% of its personal finance questions correctly on average. The good news is that teaching works. Georgia, Idaho, and Texas began requiring personal finance education in high school in 2007, and young adults who were in school after the requirements began had higher credit scores and lower rates of falling behind on payments than young adults in comparable states, according to a study published by the Federal Reserve Board. Thirty states now guarantee a standalone personal finance course before high school graduation, according to Next Gen Personal Finance’s state tracker, though some of those requirements are still phasing in.

A class can teach the concepts. A first paycheck, a first Roth IRA contribution, and a first credit decision are where the concepts turn into habits, which is why The Age-By-Age Playbook to Financial Literacy ends with these years. The table shows one way to pace them.

Decode the first paycheck

A first job comes with rules your teen has never had to think about. Under federal law, 14- and 15-year-olds can work only outside school hours, and no more than 3 hours on a school day and 18 hours in a school week, according to the Department of Labor. At 16 and 17, teens can work unlimited hours in any job that hasn’t been declared hazardous by the Secretary of Labor, the department says. Many states add rules of their own, so check yours before the first shift.

Read the job offer closely, too. Employers may pay workers under 20 a youth minimum wage of $4.25 an hour during their first 90 consecutive calendar days on the job, unless a state or local law requires more, according to the Department of Labor. After that, the regular minimum wage applies.

Read the first pay stub together

The gap between what your teen earned and what reached their account is the first lesson. Gross pay is what they earned; net pay is what’s left after deductions. For most jobs, Social Security and Medicare taxes take 7.65% of wages, 6.2% for Social Security and 1.45% for Medicare, according to the IRS. Federal income tax may come out too, depending on the W-4 your teen filled out, and so may state and local taxes where they apply. Here’s a sample week:

A hypothetical pay stub. State and local income taxes, where they apply, and any other deductions would also come out, and without an exemption, the employer would withhold federal income tax based on the W-4.

One exception is worth knowing if you own a business. When a child under 18 works for a parent’s sole proprietorship, or for a partnership in which each partner is the child’s parent, the pay isn’t subject to Social Security and Medicare taxes, though it is still subject to income tax withholding, the IRS explains. The work and the pay should be real and documented, as What Qualifies as “Earned Income” for a Minor’s Roth IRA? describes.

Fill out the W-4 with care

On the first day, your teen will fill out Form W-4, which tells the employer how much federal income tax to withhold. Your teen can claim exemption from withholding for 2026 only if they had no federal income tax liability in 2025 and expect to have none in 2026, according to the 2026 form, which has a checkbox for the claim. Exemption doesn’t carry over from year to year: the form says a new W-4 is due by February 16, 2027. It covers only federal income tax, so Social Security and Medicare taxes still come out. And with no income tax withheld, the form warns, your teen may owe taxes and penalties when they file.

File a first tax return

A teen whose only income is wages generally owes no federal income tax on earnings up to $16,100 in 2026, the standard deduction for a single filer, according to the IRS’s 2026 inflation adjustments. That doesn’t make a return pointless. If any federal income tax was withheld, filing is how your teen gets it back, and walking through a W-2 together is a lesson in itself. Working for themselves is different. A teen with net earnings of $400 or more from babysitting, lawn care, or other self-employment usually must pay self-employment tax, the IRS says, which covers Social Security and Medicare at a combined rate of 15.3%. If your teen also has investment income in a custodial account, Navigating the 2026 Kiddie Tax Thresholds explains how it’s taxed.

Make a paycheck plan

The four buckets from Grade School (Ages 6-10) still work. They just get bigger. Before the first paycheck arrives, decide together how each one will be split, and make the saving automatic: if the employer offers split direct deposit, send a set share straight to a savings account, the same pay-yourself-first habit Automating the Nest Egg describes for your own paycheck. One simple starting point is three shares: long-term savings such as a Roth IRA, a near-term goal like a car or college costs, and money to spend and give. Let your teen set the shares, and consider sweetening the long-term one with a match, as The “Match” Program explains.

Open a custodial Roth IRA

Earned income opens the door to the account with the longest runway your teen will ever have. A custodial Roth IRA can be opened for a minor who has earned income for the year, and an adult keeps control until the child reaches the age when control must be transferred, typically 18 or 21 depending on the state, according to Fidelity. For 2026, contributions can’t exceed the lesser of your teen’s earned income or $7,500. The money doesn’t have to come out of your teen’s paycheck. As long as your teen earned enough, it doesn’t matter where the contributions come from, so you or a grandparent can contribute as a gift or match what your teen saves. The Custodial Roth IRA explains the account in full.

Why 15 is a great time to start

Time does the heavy lifting. At a hypothetical 7% average annual return, the model used throughout GoodNest’s guides, one $2,000 contribution at 15 could be worth about $58,900 at 65. The same $2,000 contributed at 35 could be worth about $15,200, roughly a quarter as much:

• The $2,000 contribution
• Growth by 65

One $2,000 contribution at each age, valued at 65, at a hypothetical 7% average annual return compounded yearly, the model used throughout GoodNest’s guides, with nothing else added or taken out. Fees aren’t included, and returns aren’t guaranteed.

See the numbers

A $2,000 Roth IRA contribution, valued at 65

Age at contribution	Contributed	Value at 65
Age 15	$2,000	$58,914
Age 16	$2,000	$55,060
Age 17	$2,000	$51,458
Age 18	$2,000	$48,091
Age 25	$2,000	$29,949
Age 35	$2,000	$15,225
Ages 15 to 18, $2,000 each	$8,000	$213,523

Four years of $2,000 contributions, at 15, 16, 17, and 18, add up to $8,000 and could be worth about $213,500 at 65. Qualified withdrawals from a Roth IRA are tax-free, too. The Cost of Waiting shows the same math for the family’s own savings.

It’s more flexible than it sounds

Many teens balk at locking money away until 59½. They don’t have to. A Roth IRA allows the owner to take out 100% of contributions at any time and for any reason, with no taxes or penalties, and withdrawals are generally considered to come from contributions first, Fidelity explains. Earnings are different. They can come out tax-free once the owner is 59½ and the account has met a five-year rule; taken earlier, they can face income tax and a 10% additional tax unless an exception applies. Two exceptions to the 10% tax fit young adults: withdrawals up to the amount of qualified higher education expenses, and up to $10,000 for a qualified first-time home purchase, according to the IRS. Even then, the earnings can be taxable.

Its balance stays off the FAFSA

Retirement savings get gentle treatment in financial aid. The FAFSA doesn’t ask families to list the balances of retirement accounts, including Roth IRAs, MEFA explains. Withdrawals are another matter: money taken out can count as untaxed income on a later FAFSA, The College Investor notes, so plan any withdrawals for college carefully. How 529s and UTMAs Impact the FAFSA compares how each account counts.

Keep the records

If your teen’s earnings won’t show up on a tax return, Fidelity suggests keeping a written log of what they earned in case the IRS asks questions. Save pay stubs and W-2s from a job, and dates, clients, and amounts for babysitting or yard work. What Qualifies as “Earned Income” for a Minor’s Roth IRA? has the full checklist.

If your teen also has a Trump Account

The account’s special rules end sooner than many parents expect. Contributions under the Trump Account rules are allowed only during the growth period, which ends before January 1 of the calendar year in which your child turns 18; after that, the account generally follows the rules for traditional IRAs, according to EY’s summary of IRS guidance. For a teen who’s already 15, that leaves only a few years of contributions. The 530A Trump Account Explained covers the rest.

Steer clear of debt

Your teen will be offered credit long before they need it, so teach how it works while the stakes are still zero. Three kinds of debt are most likely to come up first: credit cards, student loans, and “buy now, pay later” plans.

Learn how credit cards and scores work

Federal rules limit credit cards for young adults. A card issuer can’t open an account for someone under 21 unless they show an independent ability to make the payments or have a cosigner who is 21 or older, under Regulation Z, the rules that carry out the Truth in Lending Act. Before your teen applies, explain what a credit score measures. FICO Scores are calculated from five kinds of information in a credit report: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%), according to myFICO. Paying on time and keeping balances low do most of the work, and starting early helps with the third.

Some families add a teen as an authorized user on a parent’s card that’s paid in full every month. Ask the issuer first, because policies vary. In a NerdWallet survey of major card issuers, American Express allowed authorized users as young as 13 but didn’t report them to the credit bureaus until 18, and Chase said it doesn’t report the authorized user credit history of minors, NerdWallet reported. If you add your teen, set a spending limit, review the statement together each month, and remember that the bill is yours.

Show what interest really costs

Credit card interest is expensive. In the second quarter of 2026, credit card accounts at commercial banks that were charged interest paid an average rate of 22.15%, according to the Federal Reserve. Paying the full statement balance by the due date usually avoids interest on purchases. Paying a little at a time does not:

A $1,000 balance with no new purchases and a fixed payment each month, with interest charged monthly at 22.15% a year, the Federal Reserve’s average for credit card accounts assessed interest in the second quarter of 2026. Paying in full assumes the card has a grace period on purchases. Real cards set their own rates, minimum payments, and fees.

At $25 a month, a $1,000 balance takes more than six years to pay off and costs about $833 in interest. At $50 a month, it takes just over two years and costs about $260. The lesson for your teen: a card is a way to pay, not extra money, and the full balance gets paid every month.

Treat buy now, pay later as debt

Buy now, pay later plans split a purchase into installments, which can make them feel like a way to pay rather than a loan. They’re still debt. In the Federal Reserve’s 2025 survey of household finances, 16% of adults used buy now, pay later, and 11% of those users had a payment trigger an overdraft or non-sufficient funds fee from their bank in the prior year. A good rule of thumb for your teen: if it doesn’t fit in today’s budget, splitting it into four payments doesn’t make it fit.

Borrow for college with a plan

Student loans are often a young adult’s first big debt decision, and it gets made at 17 or 18. In 2023-24, 47% of bachelor’s degree recipients from public and private nonprofit four-year colleges graduated with debt, and those who borrowed owed $29,560 on average, according to the College Board. New federal Direct Loans for undergraduates carry a fixed 6.52% rate for 2026-27, the Department of Education announced. Repaid over 10 years at that rate, $29,560 would cost about $336 a month, and about $10,800 in interest along the way.

Federal loans for students have limits, too. A dependent undergraduate can borrow up to $5,500 in the first year, $6,500 in the second, and $7,500 in each later year, up to $31,000 in all, and for new borrowers since July 1, 2026, Parent PLUS loans are capped at $20,000 a year and $65,000 in total per student, NYIT’s financial aid office explains. Treat those limits as ceilings, not targets.

Then bring your teen into the numbers. The 2027-28 FAFSA, for students starting college in fall 2027, opened on September 23, 2026, eight days ahead of its usual October 1 release, Money reported. Fill it out together, compare each college’s net price rather than its sticker price, and agree on a borrowing limit before acceptance letters arrive. Setting Realistic Goals helps divide savings between college and everything else, and The Complete Guide to 529 College Savings Plans explains how a 529 pays for school.

Make the final sprint to independence

Independence doesn’t arrive on an 18th birthday. In the Federal Reserve’s 2025 survey, 49% of adults under 30 lived with a parent, and 47% of adults ages 18 to 29 had received help from someone outside their household to pay an expense in the prior 12 months, with a cell phone bill among the most common. That isn’t failure. It’s a hand-off that takes years, and the last two years of high school are the time to start it on purpose.

Hand over real bills

Pick one or two recurring costs your teen can own before graduation, such as their share of the phone plan, a streaming subscription, or part of the car insurance. Have each bill paid from their own account, on time, every month. Missing a payment while you’re nearby is a lesson. Missing one at 22, when late fees and shutoffs are real, is a setback.

Build a starter emergency fund

In the same survey, 63% of adults said they would cover a hypothetical $400 emergency expense using cash or its equivalent, and 59% had at least one major, unexpected expense in the prior 12 months. The most common was a major vehicle repair or replacement, which hit 30% of adults. If your teen drives, that’s the emergency fund’s first job. A starter fund of a few hundred dollars, kept in a savings account that isn’t linked to their debit card, turns a surprise into an inconvenience instead of a debt.

Know what changes at 18

Several things change around 18, and some depend on your state or the account’s terms:

Custodial accounts hand over at an age set by state law, which What Happens at the Age of Majority? lists state by state. With the Fidelity Youth Account, the teen decides at 18 whether a parent keeps access, according to Fidelity’s FAQs. If your health plan covers dependents, your teen can usually stay on it until 26, HealthCare.gov explains. And once your child reaches the age of majority, you lose automatic access to their health information, while access to education records ends when they turn 18 or enroll in college, Schwab notes, suggesting documents such as a HIPAA authorization, a health care proxy, and a durable power of attorney. The forms vary by state, so an estate planning attorney can help.

Plan the hand-off conversation

If your teen will control a custodial account at 18 or 21, the money talk can’t wait for the paperwork. Before the account changes hands, walk through what’s in it, where it came from, and what it’s for, and agree on a plan for the first year. The “Wealth Transfer” Conversation has a script, The Hand-Off covers the mechanics, Liquidating Safely explains how to time withdrawals for tuition, and Using Custodial Funds for Life Starts shows how the money can help with a first car, a wedding, or a first home.

Mistakes to avoid

• Spending every paycheck by default. Set the split before the first payday, while saving is still a decision rather than a sacrifice.
• Claiming exempt without checking. Exemption applies only if your teen owed no federal income tax last year and expects to owe none this year, and it has to be renewed every year.
• Skipping the Roth IRA because retirement feels far away. Contributions can come back out at any time, so starting early costs little flexibility.
• Contributing more than your teen earned. Everyone’s Roth IRA contributions combined can’t exceed your teen’s earned income for the year.
• Treating a credit limit as a budget. The limit is how much the bank will lend, not how much your teen can afford.
• Choosing a college before setting a borrowing limit. Agree on the most your family will borrow first, and compare net prices, not sticker prices.
• Letting 18 arrive unannounced. Account handoffs, health care paperwork, and the money talk all go better with a few months’ notice.

Connect the paychecks to the nest egg

High school brings some of the biggest milestones of childhood: a quinceañera or sweet sixteen, a confirmation, and graduation. Structuring Milestone Contributions shows how to plan around each one, and by now your teen can help decide how the gifts are used: how much goes toward college, how much into the Roth IRA, and how much is theirs to spend.

GoodNest is built for that part of the plan. You create a page for your child and share one link with the people you choose, and the same page can stay with your child from the shower to graduation. Guests can give without creating an account, often alongside a small keepsake like a book, and the page keeps each gift with the giver’s name and note. GoodNest doesn’t hold or invest the money. Gifts go straight to you by Zelle, Venmo, or PayPal, and you move each gift into the account it’s meant for.

That makes graduation gifts a natural fit for a teen’s Roth IRA. If your teen earned $3,000 at a summer job, up to $3,000 of graduation money can go into their Roth IRA for that year, as long as total contributions from everyone stay within what they earned. Set the custodial Roth IRA as the destination on your child’s page, and the page tells family that’s where their gifts go. Let your teen write the thank-you notes, starting from the names and notes the page keeps and the thank-you GoodNest drafts in their voice. Thank You Notes and Portfolio Updates has templates, and Building Your Village covers the bigger picture.

Your high school checklist

Before your teen turns 18, aim to check off each of these:

• A first job, done right. Your teen knows the work rules for their age and has read a pay stub with you, line by line.
• A W-4 they understand. Your teen knows what they claimed and why, including whether exemption applies this year.
• A first tax return. Your teen has filed one, or knows why they didn’t need to.
• A paycheck plan. Each paycheck is split automatically between saving, investing, spending, and giving.
• A custodial Roth IRA. It’s open, with contributions that stay within what your teen earned.
• Credit, learned before used. Your teen can explain interest, credit scores, and why the full balance gets paid.
• A borrowing limit for college. You’ve filled out the FAFSA together and agreed on how much is too much to borrow.
• A real bill and a starter emergency fund. Your teen pays at least one recurring bill and has a few hundred dollars set aside.
• Paperwork for 18. Your teen knows what changes at 18 and has signed the health care and financial documents your family chose.
• The money talk. You’ve walked through every account that will become theirs.

The bottom line

Ages 15 to 18 are the dress rehearsal for adulthood. Read the first pay stub together, handle the W-4 and the first tax return with care, and split each paycheck before it’s spent. Open a custodial Roth IRA as soon as your teen has earned income, because $2,000 at 15 could grow to nearly four times what the same $2,000 could at 35. Teach credit, interest, and student loans before your teen can borrow, and start the hand-off early: real bills, a starter emergency fund, and a clear plan for what changes at 18. That completes The Age-By-Age Playbook to Financial Literacy, and The Hand-Off picks up from there.

Frequently asked questions

Can a 15-year-old open a Roth IRA?

Yes, if they have earned income, such as wages from a job or pay for babysitting. A parent or other adult opens a custodial Roth IRA and controls it until the age set by state law, typically 18 or 21. For 2026, contributions can’t exceed the lesser of your teen’s earned income or $7,500, and the money can come from you as a gift or a match.

Should my teen claim exempt on Form W-4?

Only if they qualify. For 2026, your teen must have had no federal income tax liability in 2025 and expect none in 2026. Exemption covers only federal income tax, not Social Security or Medicare, and it must be renewed every year; the 2026 form says a new W-4 is due by February 16, 2027.

Does my teenager need to file a tax return?

Often not, if their only income is wages: a teen with only wages generally owes no federal income tax on up to $16,100 in 2026. But filing is how your teen gets back any federal income tax that was withheld, and a teen with $400 or more in net self-employment earnings usually must pay self-employment tax, which is reported on a tax return.

Should my teen get a credit card before college?

Under 21, a card in your teen’s own name requires an independent ability to make the payments or a cosigner who is 21 or older. Some families start instead by adding their teen as an authorized user on a card that’s paid in full each month. Ask the issuer whether and at what age it reports authorized users to the credit bureaus, because some don’t report minors.

How much of each paycheck should a teen save?

There’s no single rule. A simple approach is to set the split before the first paycheck arrives: a share for long-term savings such as a Roth IRA, a share for near-term goals like a car or college, and the rest to spend and give. Automate the saving shares, and consider matching what your teen puts toward the long term.

Sources

• U.S. Bureau of Labor Statistics, The Economics Daily, “Teens ages 16 to 19 were employed at nearly half the rate of young adults ages 20 to 24 in July 2026” (August 2026).
• U.S. Bureau of Labor Statistics, The Economics Daily, “One in four employed youth worked in leisure and hospitality in July 2026” (September 22, 2026).
• Consumer Financial Protection Bureau, “Consumer Financial Protection Bureau Unveils Youth Financial Education Initiatives”, on its report Building Blocks to Help Youth Achieve Financial Capability (accessed October 3, 2026).
• TIAA Institute and the Global Financial Literacy Excellence Center, 2026 TIAA Institute-GFLEC Personal Finance Index (accessed October 3, 2026).
• Board of Governors of the Federal Reserve System, Finance and Economics Discussion Series, “State-Mandated Financial Education and the Credit Behavior of Young Adults” (accessed October 3, 2026).
• Next Gen Personal Finance, state tracker of personal finance graduation requirements (accessed October 3, 2026).
• U.S. Department of Labor, Wage and Hour Division, YouthRules! brochure on work rules for young workers (accessed October 3, 2026).
• U.S. Department of Labor, Wage and Hour Division, YouthRules!, rules for 16- and 17-year-olds in nonfarm jobs (accessed October 3, 2026).
• U.S. Department of Labor, Wage and Hour Division, Fact Sheet #32, Youth Minimum Wage under the Fair Labor Standards Act (accessed October 3, 2026).
• Internal Revenue Service, Topic no. 751, Social Security and Medicare withholding rates (accessed October 3, 2026).
• Internal Revenue Service, “Family employees” (accessed October 3, 2026).
• Internal Revenue Service, Form W-4 (2026), Employee’s Withholding Certificate (accessed October 3, 2026).
• Internal Revenue Service, “IRS releases tax inflation adjustments for tax year 2026, including amendments from the One Big Beautiful Bill” (accessed October 3, 2026).
• Internal Revenue Service, Topic no. 554, Self-employment tax (accessed October 3, 2026).
• Fidelity Investments, “Turbocharge your child’s retirement with a Roth IRA for Kids” (updated July 29, 2026).
• Internal Revenue Service, Topic no. 557, Additional tax on early distributions from traditional and Roth IRAs (accessed October 3, 2026).
• MEFA, guide to what’s reported on the FAFSA (accessed October 3, 2026).
• The College Investor, “Do You Report A 401k Or IRA On The FAFSA?” (accessed October 3, 2026).
• EY Tax News, “IRS releases first set of guidance on Trump accounts”, on IRS Notice 2025-68 (December 5, 2025).
• Electronic Code of Federal Regulations, 12 CFR 1026.51, Ability to pay (Regulation Z) (accessed October 3, 2026).
• myFICO, “What’s in my FICO Scores?” (accessed October 3, 2026).
• NerdWallet, “Which Credit Cards Help Authorized Users Build Credit?” (accessed October 3, 2026).
• Board of Governors of the Federal Reserve System, Consumer Credit, G.19, release of August 7, 2026, on June 2026 data.
• Board of Governors of the Federal Reserve System, “Economic Well-Being of U.S. Households in 2025: Fact Sheet”, from the Survey of Household Economics and Decisionmaking conducted in October 2025 (May 2026).
• College Board, news release on Trends in College Pricing and Student Aid 2025 (accessed October 3, 2026).
• U.S. Department of Education, Federal Student Aid, “Interest Rates for Federal Direct Loans First Disbursed Between July 1, 2026 and June 30, 2027” (June 4, 2026).
• New York Institute of Technology, Office of Financial Aid, “Federal Loan Limits” (accessed October 3, 2026).
• Money, report on the early launch of the 2027-28 FAFSA (September 2026).
• Fidelity Investments, “Fidelity Youth FAQs” (accessed October 3, 2026).
• HealthCare.gov, “How to get or stay on a parent’s plan” (accessed October 3, 2026).
• Charles Schwab, “5 Essential Documents for College Kids” (accessed October 3, 2026).

This article is for general educational purposes only and is not financial, tax, or legal advice. Projections use a hypothetical 7% average annual return, which is not guaranteed; actual returns vary and can be negative, and investing involves risk, including the loss of money you put in. Past returns don’t predict future returns. The sample pay stub and the credit card and student loan payments are illustrations, not predictions. Tax figures are for 2026 and change each year, and state rules on work, taxes, accounts, and legal documents vary. Products, programs, and organizations named are examples, not endorsements, so check each account’s current terms, fees, and protections before opening one. GoodNest does not provide investment, tax, or legal advice and does not hold or invest funds.