First job? Check. First shifts? Done. First paycheck? Finally!
Congratulations: You are officially a member of the workforce! Earning your first paycheck is a big milestone, but it might also raise some questions. Our quick guide will help you read your paycheck like a pro.
Why is my paycheck lower than I expected?
Wondering why the number on your check isn’t adding up to the hours you worked? In a word: taxes. Deductions are portions of money taken from your gross pay for things like taxes, retirement, or benefits; you should see all deductions outlined on your paystub.
As far as taxes go, these are the major ones to expect:
- Federal income tax. This helps fund things like schools, roads, and government programs.
- State/local taxes. This will depend on where you live.
- Social Security tax. This supports retirement and disability benefits.
- Medicare tax. This helps cover healthcare for older adults (including you, someday).
Remember, your employer isn’t keeping this money. It’s sent directly to the government on your behalf.
What is gross pay versus net pay?
This is another common question. Gross pay is what you earn before taxes and deductions are taken out. Net pay is the amount you actually take home (your real paycheck). Sometimes this is called take-home pay
For example: If you worked 20 hours at $14/hour, your gross pay would be $280. The final number on your paycheck (what you take home after deductions) is your net pay, which will be lower than your gross pay.
Do I need to worry about taxes?
The short answer? Maybe, but probably not as much as you think.
Here’s how it works: Your employer should already be withholding (or “taking out”) estimated taxes based on the information you provided when you were hired. At tax time, you’ll likely need to file a tax return, but many teens actually get money back as a refund. And if you earned a smaller amount over the year (which is common for a part-time job), there’s a good chance you won’t owe anything extra. Your parents can file on your behalf, and you’ll just add your signature where it’s needed.
What is direct deposit (and should I use it)?
Direct deposit is when your paycheck goes straight into your bank account (no paper check). People typically use direct deposit because it’s faster, more secure, and you can usually access your money right away.
To sign up, your employer will ask for your bank routing number and your account number; you should be able to find these in your online banking account, or on the bottom of your personal checks (if you have them).
What if I get a paper check?
If you receive a paper check instead of a direct deposit, no worries! It’s easy to get that money into your account. You can always go into your local bank branch to deposit a paper check, or deposit it using a mobile app. Just snap a photo, and you’re done.
