One of the best ways to learn how to manage money effectively is to actually have it and manage it. Often we learn this hard lesson as a adults, when there is more to lose. Ideally, teenagers get the opportunity to earn and manage money, and get their financial chops while the financial stakes are not quite as high.
Salary negotiations are a key financial skill, because they can have a huge impact on the amount of money any of us has. Salary negotiations are an even bigger issue for young women. Studies show that female college graduates still under-negotiate their male counterparts, and this can cost a woman, by some accounts, half a million dollars over a lifetime.
So how can we get teenagers on the road to effective financial management by learning about salary negotiations early?
I had the opportunity recently to work with a friend’s teenaged daughter on salary negotiations in a real-life situation, and the steps we took are a great model for this practice. I was hiring this young woman to do some work at our house while we were away. She was going to water plants and bring in the mail and newspapers. I figured this might be her first foray into salary negotiations, so I sat down with her and her father to discuss this important issue.
I started out by asking her what she wanted to be paid for the work. She looked at us with a scared expression on her face and said, “Oh no — I’m really bad at this!” and refused to give a number. She was completely lost about where to start.
So I talked with my friend’s daughter about a framework for determining a wage. Here are some of the issues to consider:
- Payment Method — Are you going to be paid on an hourly or project/salary basis? What makes the most sense for the job? What is the easier way for you to envision the work? If you do want to charge a project fee, you may want to use the number of hours the job will take as a foundation for the fee. Your time has value, and you want to be compensated for it.
- Market — What is the market value for these services? If you are watering plants or walking dogs, what are other people at your age in your area earning for this type of work? What is the minimum wage in your state? The market is an important factor in any kind of job negotiation, because it is a benchmark and generally accepted measure of what a job is worth.
- Value — Do you bring any particular value to the work? For example, do you have experience, or not? Will you have any support from your parents? Are you doing the job at the last minute, and providing that extra value? Also look at the value the job has for you. If you are just starting out and want to gain experience while you are not completely proficient at the work, you might consider charging a little less. But just remember to keep that a temporary strategy, and raise prices once you have some experience.
Throughout the week, we’ll look more closely at the issue of women and salary negotiations on our Facebook page, offering the current wisdom in this area. Also on our Facebook page we will be offering an exercise for teenaged girls to do to learn how to determine value around salary negotiations. And next week in this space, we will talk more about how to articulate one’s value in a job negotiation. So stay tuned!