Tag Archives: money talk

How to Read a Paystub

Does your paystub puzzle you? Do the myriad boxes with taxes, deductions and credits make you a little dizzy? USAgencies Credit Union is here to demystify things!

Q: My accountant suggests I review my paystub to see if any changes need to be made to the amounts withheld, but I’m finding that to be an impossible task. I always receive my paycheck via direct deposit and I can’t make heads or tails out of the numbers or information on my paystub. Where do I begin?

A: Having your paycheck directly deposited into your checking account can be super-convenient, but it can also lead to being unfamiliar with your paystub. It’s important to review your paystub occasionally to check for possible errors and to review the deductions, as your accountant suggests. No worries, though, USAgencies Credit Union is here to help! We’ll walk you through a typical paystub and break down all the numbers and information so, going forward, you can do it on your own.

Navigating your paystub

Before reviewing the actual numbers, let’s take a moment to explore the way a paystub is structured.

A typical paystub will have your employer’s information in the upper left-hand corner, followed by the pay period for that paycheck. The upper right-hand corner will be stamped with the date the payment was issued.

Moving downward on the left-hand side, a section titled “Gross Pay,” will list the employee’s gross salary per pay period, along with any additional payments, such as overtime pay and benefits. Running parallel to these numbers will be two columns, one labeled “Current,” and the other labeled “YTD,” or year-to-date.

The right side of the paystub will be designated for tax information and deductions. Each of the items listed here will have separate numbers for current amounts and YTD.

Finally, the paystub will summarize all the information and provide a total for net pay.

Now let’s talk about what each of these items means.

Gross pay

Gross pay refers to the total sum of money earned in a pay period before taxes or deductions are withheld. This number represents the employee’s taxable income for the pay period.

The columns labeled “Current” and “YTD” help the employee track how much they’ve earned and paid in taxes and deductions for the pay period, and for the entire year through the respective pay period.

The “Gross Pay” section often includes the employee’s rate per hour and the number of hours worked in the pay period. When multiplied, these two amounts should be equal to the total gross pay.

There may also be various other payments listed here, such as overtime pay, bonuses and commissions.


In this section, the paystub lists the various taxes the employee and employer pay each pay period.

Here are the most common taxes listed on paystubs:

    • Federal income tax. Uncle Sam takes a bite out of every employee’s paycheck. The employer will use several pieces of information to determine an employee’s annual tax liability, including the employee’s marital status, income level and the amounts of allowances listed in their W-4. The estimated tax liability will be divided by the number of pay periods in a year to reach the amount that appears on the paystub. The employer will send this tax directly to the federal government.At the end of the year, the difference between the employee’s actual tax liability and the amount withheld will either be refunded to the employee or collected from them, as necessary. Employees can choose to have more or less money deducted from each paycheck by adjusting the number of allowances listed in their W-4s.
    • State taxes. Some states collect state income tax for each pay period.
  • Federal Insurance Contributions Act (FICA). This refers to the law that requires every employee to contribute to the Social Security and Medicare programs with each paycheck. These contributions sometimes appear separately.By law, every employee must pay 6.2% of their gross income to the Social Security fund. Employers must contribute an additional 6.2% for each employee. Self-employed workers must pay both the worker and employer portions of this tax, effectively doubling their Social Security tax liability.Medicare tax liability is calculated as 1.45% of a worker’s gross income. Employers must pay an additional 1.45% for each employee they hire. Here, too, the self-employed must cover both contributions and pay 2.9% of their earnings to Medicare.Most paystubs will separate the employer’s tax liability for these programs and the employee’s tax burden.


Besides for these mandated taxes, many workers will find additional deductions on their pay stubs. These include deductions for insurance coverage; deductions for a health savings account, which allows employees to set aside pre-tax dollars to be used for medical expenses; childcare deductions; and deductions for retirement savings plans, including contributions to a 401K or IRA account.

Some paystubs will include a sub-section for employer contributions. This refers to any employer-sponsored contributions for retirement, healthcare costs and other benefits.

In summary

The final section of a paystub will summarize all the information listed above it and highlight the employee’s net pay, or the amount of money the employee will actually see on their paycheck. This section will also list any reimbursements, or money the business owes the employee for using their own funds for business-related expenses. In addition, the summary will include gross earnings, deductions and contributions and finally, the actual check amount.

Now that you know what each item on your paystub means, you can easily review it and check it for errors. You work hard for your money — don’t lose out from a careless mistake.

The Money Talk with Kids

National Credit Union Youth Month is here, keeping your kids educated about saving and spending money is crucial for their financial success. Are you looking for ideas to start the money talk? We’ve got some conversation starters for you!

Saving Smart

For the responsible adult who thinks about being prepared for the future, savings are a fixed expense that is built into the monthly budget just like car payments and insurance. For most people, though, this habit does not come naturally. It needs to be acquired and practiced. Teach your kids those saving smarts now when they’re young to help make it a lifetime habit they’ve already mastered by the time they hit their 20s.

Give your kids a clear understanding of why saving is crucial to financial wellness and how to make it happen. Here are some points to cover:

  • Why putting money aside each month is crucial
  • How interest and compound interest work
  • Long-term vs. short-term saving
  • Reasons to save

Conversation starters (For kids under age 9):

  • Let’s say you’ve only got $15 and you want to buy a drone that costs $65. You get $5 a week as your allowance. How can you buy that drone?
  • When did you wait for something and find that it was more enjoyable because you waited for it?
  • Can you think of some things that Mom or Dad saves up for?
  • If you earn 10 cents for every dollar you save, how much money will you earn by putting away $5?

Conversation starters (For kids over age 9):

  • Are you saving up for anything important?
  • Can you think of some things that Mom or Dad saves up for?
  • Have you ever had to pay for something unexpected? How did you come up with the money?
  • Some things we save for are short-term goals, and others are long-term goals. Can you name some of each kind of goal? How will we save differently for each kind?
  • Do you think it’s smart for Mom and Dad to keep money they’re saving under the mattress? Why or why not?

Working It Out

One of the most fundamental financial lessons your kids are going to have to learn is about how you work for your money.

Do your kids understand that every time you pull out a wad of bills or swipe a card to pay for a purchase, that money is directly linked to time you put in at the office? Do they realize all of your money is earned through hard work?

Here’s how to make sure your kids — at any age level — understand this concept.

Goal: Teach your children that money for purchases, whether it’s paid through cash or a card, is earned through hard work. Here are some points to cover:

  • Money is earned through work.
  • Every dollar spent is time you spend working.
  • Any method used to pay for purchases comes from the same source.

Conversation starters (For kids under age 9):

  • What do you think mom/dad does all day at their job?
  • We work to do what our bosses want and need. How do you think our bosses reward us?
  • When we spend money for pizza, groceries, toys or movies, where do you think that money is coming from?
  • This is mom/dad’s paycheck from work. When we give it to USAgencies Credit Union, we have money to spend. Why do you think we put the paycheck in our account at USAgencies Credit Union?
  • When I swipe my credit/debit card, how does that pay the store owner? Where is the money coming from?

Conversation starters (For kids over age 9):

  • Why do you think people work?
  • Do you think people who work harder for their money spend it more carefully?
  • Would you still want that (article of clothing/toy/gadget) if you had to work for it?
  • If you had the choice to work 16-hour days for double the salary of an 8-hour day, would you take it? Why or why not?

We’ve also got a few fun activity pages for your kids to complete.

Youth_activity_pages preview
Download printable worksheets

Youth_activity_pages preview
Download printable worksheets

Download printable worksheets

Do you encourage your kids to save money? How do they spend their allowance, chore money and money they earn from odd jobs as soon as they have it?

Connect with us to help get your children ready for their first savings or checking account to establish healthy financial habits. Call us at 503-275-0300 Option 4, or email info@usacu.org. Everyone deserves a better banking experience. Get it here.