I heard a very interesting story of a young person who deposited their first pay check and went home thinking there was an error because there was more money than she was expecting. When she first looked at the information, she interpreted the section on deductions to be the money that was to be deposited rather than the amount that was subtracted from the full or gross amount of the pay.
Of course, she was pleasantly surprised to find that the larger amount was hers to keep. However, this story is so significant to me because I frequently hear of companies wanting to have financial professionals come to help their young employees make investment decisions. The reality is that what they need is the simple, day-to-day education on simple basics – like how to interpret a pay check, how to set up bank accounts, how to spend money and how to track money coming in and money going out (income and expenses).
When you assume that a young person needs help picking mutual funds for their retirement, you also miss the key aspect of their more immediate needs – like housing, food, transportation and understanding of basic finances.
Reading a pay check is one of those things that is assumed, and one that can have a significant impact on current and long-term finances. I know another story where the medical deduction was missed from a pay check and rather than it being listed than left blank it simply did not appear anywhere on the pay stub. You can imagine the implications of expecting that you have your medical insurance covered because it has been deducted from your pay check in the past only to find out that it hadn’t been paid.
The employer told the employee that it was his responsibility to know that the medical insurance premium was not being deducted. Fortunately for this employee, his wife had a solid financial background and was able to find the right person in the organization to help straighten the situation around with only minor complications. However, if you don’t know what you don’t know, you won’t know until it’s too late that there has been an error, or that you’ve missed an opportunity, were misunderstood or are completely out of luck!