Does your teen have their own IRA or Roth?

[Anonymous]

10. And yes, she had earned income from her sport - not significant, but $500+ that first year, which is also not nothing.

[Anonymous]

Anonymous wrote:OP here. I will sit down with DD (18 yo) and open a Fidelity Roth with her online. I’d like to make her use a portion of her own summer job money (vs entirely parents funding) so she feels like she is responsible for her finances and she gets in the habit. Of course, we will continue giving cash gifts that hopefully she will invest in the Roth, after she enjoys some for college extras and travel.

Look, I’m all about teaching kids financial literacy, but do you really want to suggest that she has to use her money? This thread is filled with parents simply gifting money to kids, through a tax vehicle, which is what you’re saying too. Why not have kids learn how to make and save and spend money on their own? To me, that’s much more powerful.

[Anonymous]

Anonymous wrote:This is great for those of you who can swing it - but also, matching money or saving for them so they can keep their earnings as spending money isn't really teaching them about money, though it's certainly setting them up to not have to worry about it in the future.

We need our kids to help pay for car insurance, gas, etc. and also to save for college with their earnings. With our household parental income (which must be much less than a lot of you), I don't think we'll also be able to start retirement accounts at 13.

IDK. 49 yo holder of 30-yr IRA here. Matching absolutely does teach the value of taking advantage of an available match (something so difficult for people to get that 401k rules have changed to make opt-outs required vs opt-ins for this reason).

More than that, though, success managing money is behavioral. What can be taught by providing the money for the investment is: “You are going to do this every year from now on, no matter what.” And that is what I learned and did, through some pretty high water—I kept putting away the $2k, then the $6k, in years when my personal income from all sources was under $25k annually.

My parents’ HHI was never over $125k in early 2000s dollars. They have never “gifted” money for cars, houses, private school education, any of that. Our HHI has never been over $200k. The IRA is now worth more than $1m.

Of course, as the PP said—no mandates. But this is a specific form of teaching that I will prioritize even if that other stuff seems completely out of reach (as it does to us as well).

[Anonymous]

My current employer doesn't even match what I put into my retirement account. Like I have money laying around to put into my kid's IRA. Lololol.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is great for those of you who can swing it - but also, matching money or saving for them so they can keep their earnings as spending money isn't really teaching them about money, though it's certainly setting them up to not have to worry about it in the future.

We need our kids to help pay for car insurance, gas, etc. and also to save for college with their earnings. With our household parental income (which must be much less than a lot of you), I don't think we'll also be able to start retirement accounts at 13.

IDK. 49 yo holder of 30-yr IRA here. Matching absolutely does teach the value of taking advantage of an available match (something so difficult for people to get that 401k rules have changed to make opt-outs required vs opt-ins for this reason).

More than that, though, success managing money is behavioral. What can be taught by providing the money for the investment is: “You are going to do this every year from now on, no matter what.” And that is what I learned and did, through some pretty high water—I kept putting away the $2k, then the $6k, in years when my personal income from all sources was under $25k annually.

My parents’ HHI was never over $125k in early 2000s dollars. They have never “gifted” money for cars, houses, private school education, any of that. Our HHI has never been over $200k. The IRA is now worth more than $1m.

Of course, as the PP said—no mandates. But this is a specific form of teaching that I will prioritize even if that other stuff seems completely out of reach (as it does to us as well).

So you would prioritize retirement savings in the early teens over saving for college or allowing the child to do high level sports/music? That's the choice for us - we can do two of these three things.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is great for those of you who can swing it - but also, matching money or saving for them so they can keep their earnings as spending money isn't really teaching them about money, though it's certainly setting them up to not have to worry about it in the future.

We need our kids to help pay for car insurance, gas, etc. and also to save for college with their earnings. With our household parental income (which must be much less than a lot of you), I don't think we'll also be able to start retirement accounts at 13.

IDK. 49 yo holder of 30-yr IRA here. Matching absolutely does teach the value of taking advantage of an available match (something so difficult for people to get that 401k rules have changed to make opt-outs required vs opt-ins for this reason).

More than that, though, success managing money is behavioral. What can be taught by providing the money for the investment is: “You are going to do this every year from now on, no matter what.” And that is what I learned and did, through some pretty high water—I kept putting away the $2k, then the $6k, in years when my personal income from all sources was under $25k annually.

My parents’ HHI was never over $125k in early 2000s dollars. They have never “gifted” money for cars, houses, private school education, any of that. Our HHI has never been over $200k. The IRA is now worth more than $1m.

Of course, as the PP said—no mandates. But this is a specific form of teaching that I will prioritize even if that other stuff seems completely out of reach (as it does to us as well).

So you would prioritize retirement savings in the early teens over saving for college or allowing the child to do high level sports/music? That's the choice for us - we can do two of these three things.

Yes, based on my own experience (which was also of 2 out of 3) I’d axe the high level sports/music.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This is great for those of you who can swing it - but also, matching money or saving for them so they can keep their earnings as spending money isn't really teaching them about money, though it's certainly setting them up to not have to worry about it in the future.

We need our kids to help pay for car insurance, gas, etc. and also to save for college with their earnings. With our household parental income (which must be much less than a lot of you), I don't think we'll also be able to start retirement accounts at 13.

IDK. 49 yo holder of 30-yr IRA here. Matching absolutely does teach the value of taking advantage of an available match (something so difficult for people to get that 401k rules have changed to make opt-outs required vs opt-ins for this reason).

More than that, though, success managing money is behavioral. What can be taught by providing the money for the investment is: “You are going to do this every year from now on, no matter what.” And that is what I learned and did, through some pretty high water—I kept putting away the $2k, then the $6k, in years when my personal income from all sources was under $25k annually.

My parents’ HHI was never over $125k in early 2000s dollars. They have never “gifted” money for cars, houses, private school education, any of that. Our HHI has never been over $200k. The IRA is now worth more than $1m.

Of course, as the PP said—no mandates. But this is a specific form of teaching that I will prioritize even if that other stuff seems completely out of reach (as it does to us as well).

I’m the pp arguing this doesn’t teach kids about money. It teaches them that parents will give them more money through tax vehicles. Your point about matching is useless if you never get a match. We’re in our 50s and neither of us have ever had one and we’ve both moved around.

When your kid gets a job, it’s just as easy to say, “hey Larla, if your co offers matching that means it’s free money.” That is teaching versus, showing them a statement where you have matched their salary, while they spent all their money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is great for those of you who can swing it - but also, matching money or saving for them so they can keep their earnings as spending money isn't really teaching them about money, though it's certainly setting them up to not have to worry about it in the future.

We need our kids to help pay for car insurance, gas, etc. and also to save for college with their earnings. With our household parental income (which must be much less than a lot of you), I don't think we'll also be able to start retirement accounts at 13.

IDK. 49 yo holder of 30-yr IRA here. Matching absolutely does teach the value of taking advantage of an available match (something so difficult for people to get that 401k rules have changed to make opt-outs required vs opt-ins for this reason).

More than that, though, success managing money is behavioral. What can be taught by providing the money for the investment is: “You are going to do this every year from now on, no matter what.” And that is what I learned and did, through some pretty high water—I kept putting away the $2k, then the $6k, in years when my personal income from all sources was under $25k annually.

My parents’ HHI was never over $125k in early 2000s dollars. They have never “gifted” money for cars, houses, private school education, any of that. Our HHI has never been over $200k. The IRA is now worth more than $1m.

Of course, as the PP said—no mandates. But this is a specific form of teaching that I will prioritize even if that other stuff seems completely out of reach (as it does to us as well).

I’m the pp arguing this doesn’t teach kids about money. It teaches them that parents will give them more money through tax vehicles. Your point about matching is useless if you never get a match. We’re in our 50s and neither of us have ever had one and we’ve both moved around.

When your kid gets a job, it’s just as easy to say, “hey Larla, if your co offers matching that means it’s free money.” That is teaching versus, showing them a statement where you have matched their salary, while they spent all their money.

We have grown kids and we fully funded them when they were little. While I understand your point, at some point, kids learn and start funding it themselves. The purpose of fully funding before they fully understand is so that kids don't miss out early years. You know the saying "time is your best friend" in investing.

[Anonymous]

My daughter (20) does. She got her first job when she was 17, and we match her earnings dollar-for-dollar up to the max.

My son (18) does not. He refuses to get a job (or do anything else). In addition to not having spending money at college this fall, he is missing out on long term gains, but this is his choice. Maybe next summer.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is great for those of you who can swing it - but also, matching money or saving for them so they can keep their earnings as spending money isn't really teaching them about money, though it's certainly setting them up to not have to worry about it in the future.

We need our kids to help pay for car insurance, gas, etc. and also to save for college with their earnings. With our household parental income (which must be much less than a lot of you), I don't think we'll also be able to start retirement accounts at 13.

IDK. 49 yo holder of 30-yr IRA here. Matching absolutely does teach the value of taking advantage of an available match (something so difficult for people to get that 401k rules have changed to make opt-outs required vs opt-ins for this reason).

More than that, though, success managing money is behavioral. What can be taught by providing the money for the investment is: “You are going to do this every year from now on, no matter what.” And that is what I learned and did, through some pretty high water—I kept putting away the $2k, then the $6k, in years when my personal income from all sources was under $25k annually.

My parents’ HHI was never over $125k in early 2000s dollars. They have never “gifted” money for cars, houses, private school education, any of that. Our HHI has never been over $200k. The IRA is now worth more than $1m.

Of course, as the PP said—no mandates. But this is a specific form of teaching that I will prioritize even if that other stuff seems completely out of reach (as it does to us as well).

I’m the pp arguing this doesn’t teach kids about money. It teaches them that parents will give them more money through tax vehicles. Your point about matching is useless if you never get a match. We’re in our 50s and neither of us have ever had one and we’ve both moved around.

When your kid gets a job, it’s just as easy to say, “hey Larla, if your co offers matching that means it’s free money.” That is teaching versus, showing them a statement where you have matched their salary, while they spent all their money.

Sure, any given person may not (statistically speaking, likely will not) get a job with a match. But in that case having formed the habit of retirement saving and the sense of identity around it—that this is just a thing that person does year in and year out, one of the first priorities in the budget and not what happens to “extra money” if there is any—is proportionally even more important. That’s the behavioral part.

Most people can’t, and if you don’t want to for whatever reason that’s your call too. I am just saying that having it done for me did not teach me that my parents were going to give me more money thru various tax-protected vehicles—because they haven’t, which was part of the conversation at the time about opening the IRA.

[Anonymous]

I'm confused. If this money isn't taxable (and I cannot see how a $15-year-old's summer salary is), what benefit is a Roth at this point? Why not put it in a no or low fee index fund? There's nothing to lose, and then the money is available to them as young adults to help with a down payment, student loans, etc. I cannot believe any real financial advisor would advise this--only if they're getting a commission on that IRA. Truly, makes no sense to me.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This is great for those of you who can swing it - but also, matching money or saving for them so they can keep their earnings as spending money isn't really teaching them about money, though it's certainly setting them up to not have to worry about it in the future.

We need our kids to help pay for car insurance, gas, etc. and also to save for college with their earnings. With our household parental income (which must be much less than a lot of you), I don't think we'll also be able to start retirement accounts at 13.

IDK. 49 yo holder of 30-yr IRA here. Matching absolutely does teach the value of taking advantage of an available match (something so difficult for people to get that 401k rules have changed to make opt-outs required vs opt-ins for this reason).

More than that, though, success managing money is behavioral. What can be taught by providing the money for the investment is: “You are going to do this every year from now on, no matter what.” And that is what I learned and did, through some pretty high water—I kept putting away the $2k, then the $6k, in years when my personal income from all sources was under $25k annually.

My parents’ HHI was never over $125k in early 2000s dollars. They have never “gifted” money for cars, houses, private school education, any of that. Our HHI has never been over $200k. The IRA is now worth more than $1m.

Of course, as the PP said—no mandates. But this is a specific form of teaching that I will prioritize even if that other stuff seems completely out of reach (as it does to us as well).

I’m the pp arguing this doesn’t teach kids about money. It teaches them that parents will give them more money through tax vehicles. Your point about matching is useless if you never get a match. We’re in our 50s and neither of us have ever had one and we’ve both moved around.

When your kid gets a job, it’s just as easy to say, “hey Larla, if your co offers matching that means it’s free money.” That is teaching versus, showing them a statement where you have matched their salary, while they spent all their money.

+1 This is such a silly argument. That opening IRAs for non-taxable income "teaches" teens now to do it later? When the money becomes free, meaning from employer matches, just tell them, as their employer and all their friends who are also starting out will do. This is not that hard.

[Anonymous]

Anonymous wrote:I'm confused. If this money isn't taxable (and I cannot see how a $15-year-old's summer salary is), what benefit is a Roth at this point? Why not put it in a no or low fee index fund? There's nothing to lose, and then the money is available to them as young adults to help with a down payment, student loans, etc. I cannot believe any real financial advisor would advise this--only if they're getting a commission on that IRA. Truly, makes no sense to me.

You can use an IRA towards a home purchase.

But I don’t want something that is easily liquidated like a mutual fund, because I know how 20-somethings spend money.

[Anonymous]

Anonymous wrote:I'm confused. If this money isn't taxable (and I cannot see how a $15-year-old's summer salary is), what benefit is a Roth at this point? Why not put it in a no or low fee index fund? There's nothing to lose, and then the money is available to them as young adults to help with a down payment, student loans, etc. I cannot believe any real financial advisor would advise this--only if they're getting a commission on that IRA. Truly, makes no sense to me.

+1 if a teen makes $500-1000 babysitting in cash just keep the cash. In order to do a Roth you’d have to file a tax return for that small amount of money. Seems like overkill.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I'm confused. If this money isn't taxable (and I cannot see how a $15-year-old's summer salary is), what benefit is a Roth at this point? Why not put it in a no or low fee index fund? There's nothing to lose, and then the money is available to them as young adults to help with a down payment, student loans, etc. I cannot believe any real financial advisor would advise this--only if they're getting a commission on that IRA. Truly, makes no sense to me.

+1 if a teen makes $500-1000 babysitting in cash just keep the cash. In order to do a Roth you’d have to file a tax return for that small amount of money. Seems like overkill.

This is not correct