When your children enter the workforce: What now?


This article is part of our “What Now?” series that helps multigenerational families prepare for life changes. With access to all the capabilities of Bank of America, Merrill Private Wealth Management is uniquely situated to help with whole-family wealth plans so that every generation may leave their lasting legacy.

For young adults, starting their first job can be an exciting but anxious time. They’ll be faced with multiple financial decisions, many of which can affect both their present and future financial situations.

We’ve gathered some quick and helpful details and resources for you, so you can have conversations around these topics to help your children or grandchildren make more informed decisions.

Understanding income

Help them with their choices

While you may understand the different types of compensation and their outcomes, your children may not be familiar with many of the terms associated with income.

Young adults may also not know that they may negotiate compensation, including equity or additional benefits like extra vacation days — particularly as companies find creative ways to compensate employees in competitive industries.

Use these questions to help start a conversation:

  • Are you paid hourly or on a salary?
  • Do you receive paid overtime, bonuses or commissions?
  • Do you receive any equity or options?
  • Is your compensation performance or metrics-based?

For more on income, read the basics of a paycheck.

If you have questions, contact your advisor. Consider consulting your advisor about your child’s questions to get them prepared for the workforce.

Deciding tax withholding

Show them the big picture

Taxes can be complicated for young adults who have just started in their first full-time job. They’ll have to make tax-related decisions, like completing Form W-4 for tax withholding.

It's important they understand how taxes and withholding work in relation to their holistic financial picture. Consider consulting your advisor and your tax professional about your child’s compensation, so they avoid errors like underpaying or over-withholding taxes.

Young adults may also not be aware that they can update their tax information with their employer at any time, like if they were to get married or having a baby.

Things to consider discussing:

  • What income tax is and how it works
  • The importance of paying taxes accurately
  • How expenses and deductions work
  • How to approach refunds and deficits

Here’s more about the basics of income taxes.

Merrill Private Wealth Management does not provide tax or legal advice.

It's important they understand how taxes and withholding work in relation to their holistic financial picture. Consider consulting your tax professional about your child's compensation, so they avoid errors like underpaying or over-withholding taxes.

Selecting a retirement plan

Emphasize starting early

Understandably, many young adults starting their first job aren’t considering their retirement plans. It’s important to let them know that investing now can lead to long-term rewards.

Many employers offer retirement plans, and incentivize employees to participate with contribution matching. While opting in to an employer’s plan may ultimately be the best option for your child, you should consult your advisor before encouraging your children to sign up with their employer’s plan.

Additionally, they could have access to Merrill Private Wealth Management privileges and accounts that may be a better fit than their employer’s retirement plans.

Here are a few topics for your discussions:

  • Do they know the difference between retirement plans and savings accounts?
  • Do they know the benefits of the different types of retirement accounts?
  • What type of retirement plan does the employer offer?
  • Does the employer match contributions? If so, to what amount?

For details on how retirement plans work, see the basics of retirement accounts

Your advisor is available to help your family members be prepared and answer questions so they feel confident on setting up their retirement plan that's right for them.

A private wealth advisor can help you get started.

Our advisors can help you follow your passions, build a legacy and have a positive impact on others.