It is important to understand how to read a pay slip so you know how much you are earning and what is being taken out of your pay before you receive it. Some adults do not really understand their payslips and so fail to query with their employer if they think their employer has made a mistake. Sometimes people are frustrated at the end of the financial year because they find out they have not been paying enough tax due to having a wrong tax code and so end up with a bill.
Many children do not understand that when they start working the Government requires them to take tax out of their wages before they get it. In general children aren’t shown their parents pay slip and also Mum and Dad don’t take taxes out of their pocket money! So the first time they get paid from a job they can be shocked when they see that they didn’t get all their gross income, but a net income (gross income minus taxes). Learning about taxes and other deductions (such as clothing allowances, superannuation and student loans) prepares them for understanding their first pay slip and knowing exactly what is being taken out before they get their final pay and why. It is also important to understand their pay slip so they can work out if they have been paid the correct amount or not and that the employer sends the correct amount of tax to the Government on their behalf.
Explain the terms Gross Income (Income before tax) and Net Income (Income received after taxes) and YTD (year to date) (income or taxes earned or paid so far this financial year). Explain to your child that when he starts work, most times he will have to complete a time sheet so the employer knows how much to pay him. No pay sheet – no pay. When you are training your children to do extra work around the house, you could make up a sheet they have to record how much time he “works” for you. This will be good practice for the real world.
Show your child a copy of your pay slip and ask them questions such as “How much an hour do I earn? “How much tax did I pay this week?” Inform your child that when you work for someone else (trade your time for money), you pay taxes first. When you are self-employed, own a business or are an investor, you pay taxes after deducting all your expenses (such as tools used for your business) from your income.
Sylvia’s first book called “Parents – how to stop your kids from going broke” can be bought by contacting Silbo Systems.
It is important to understand how to read a pay slip so you know how much you are earning and what is being taken out of your pay before you receive it. Some adults do not really understand their payslips and so fail to query with their employer if they think their employer has made a mistake. Sometimes people are frustrated at the end of the financial year because they find out they have not been paying enough tax due to having a wrong tax code and so end up with a bill. 
