Does your teen have their own IRA or Roth?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

This makes no logical sense. They haven't formed a habit of retirement savings because they haven't saved the money. The parents gifted it to them. The behavior is the action taken by the parents.

Sure, it's nice to see a big account that your parents gave you, but don't mistake what it is. A gift.

DP. My parents started fully funding my IRA when I was in my 20s and the idea of retirement seemed impossibly far away. It was not a financial stretch for them to do it but it was one of the few financial things they discussed with me so it made a huge impression. My parents did not do a lot to help me with expenses after I left home but they were handing over thousands every year for my retirement; it was on my mind as soon as I had kids. We are now fully funding our teen's IRA and discussing it with them. You are right that it is a gift, but if we were not able to fully fund it I think I would try to put some amount in, and/or encourage him to do the same, just to hammer home that it is an important thing to think about and prioritize now.

If you simply can't, and they can't, that's another story, but if they are saving for college they could direct some of that to an IRA. And, to the best of my knowledge, money in IRA is not considered when colleges are looking at financial aid, but parent savings and child savings are considered.

Do you hear yourself? If your parents were contributing to your retirement in your 20s they absolutely were helping you with expenses because you couldn't save otherwise. Some of us managed our own expenses and were able to start retirement in our 20s. Yours is just one more example of a gift.

[Anonymous]

When my kids' W-2s come around February, I contribute that exact amount into their Roths for the previous year (you can contribute up until April 15).
So in Feb 2023, kid's W-2 says they earned $2,947 in 2022. I contribute $2,947 to their Roth and check the box that says "contribution for 2022". I should be doing this as their pay checks come in but ....

[Anonymous]

Well, mine is lazy and doesn't even think about getting a job. He can barely do his community service for high school.
Would drive me crazy if he lived with me, but he lives with his father, so I'm ok.
I'm sure he is getting his act together one day, but until then, I'm maxing out my Roth and can slowly transfer money to him when I retire and even before if I feel like it.
I funded mine for 2022/2023 in April and it already shows 60% return. All seem to want the best for their children and the throw not only kids' earned money into some louse fund, but the match you are all so proud of. Why? Starting early is important, but so is taking some risks before they are twenty or even twenty-five.

[Anonymous]

Anonymous wrote:Well, mine is lazy and doesn't even think about getting a job. He can barely do his community service for high school.
Would drive me crazy if he lived with me, but he lives with his father, so I'm ok.
I'm sure he is getting his act together one day, but until then, I'm maxing out my Roth and can slowly transfer money to him when I retire and even before if I feel like it.
I funded mine for 2022/2023 in April and it already shows 60% return. All seem to want the best for their children and the throw not only kids' earned money into some louse fund, but the match you are all so proud of. Why? Starting early is important, but so is taking some risks before they are twenty or even twenty-five.

60% return??

[Anonymous]

I own my business. We put the kids on the payroll at the age of 6. They shredded and cleaned a bit. They contributed for about 6 years and then I stopped putting them on the payroll because they actually stopped doing the work. They invested in AAPL, TSLA and AKREX. Their Roth IRAs are both north of $80K now. When they go to college, and then graduate, they will appreciate the head start.... at least I hope they will.

[Anonymous]

Anonymous wrote:I own my business. We put the kids on the payroll at the age of 6. They shredded and cleaned a bit. They contributed for about 6 years and then I stopped putting them on the payroll because they actually stopped doing the work. They invested in AAPL, TSLA and AKREX. Their Roth IRAs are both north of $80K now. When they go to college, and then graduate, they will appreciate the head start.... at least I hope they will.

LOL. Isn't that against child labor law? I know details, details...

[Anonymous]

Anonymous wrote:I own my business. We put the kids on the payroll at the age of 6. They shredded and cleaned a bit. They contributed for about 6 years and then I stopped putting them on the payroll because they actually stopped doing the work. They invested in AAPL, TSLA and AKREX. Their Roth IRAs are both north of $80K now. When they go to college, and then graduate, they will appreciate the head start.... at least I hope they will.

hopefully they sold TSLA high. Why no meta? It's split about a dozen times since my kids have had it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We started Roth IRAs for each kid at 15, as soon as they had earned income.

Same. We also funded them and let our teen keep the money he earned. I imagine we will continue to do so for a while.

+1. Teen is now 18 and has about 10k in Roth (started at 14) and will add $6500 this year. If he earns it, we fund it completely up to the yearly limit. We’ll probably do this through college. A nice little nest egg to start him off for retirement after college.

I did the exact same. My 21-year old knows that she is responsible to start contributing to the Roth once she graduates college and gets a "real" job. Funnily enough, she didn't use all of her 529 plan, so she will get about three years' worth of contributions from that. My 18-year old has gotten the same deal. She will not, however, have any money leftover in her 529. My 15-year old hasn't started working yet.

We are fortunate to be able to give this gift to our kids. It's hard for teens to understand the value of retirement. I was a very responsible young adult and I still remember when I got my first job out of college and the Human Resource manager told me about my retirement benefits, and I thought she was crazy!

[Anonymous]

Can someone walk me through this? When you say you are matching their income in a Roth, how does this work? I didn't think you can put more than their earnings in a Roth. So if the kid earns $3000 and puts in $2000, how can you match that since they would then have contributed more to the Roth then their taxable earnings? Or are they contributing $2000 and you the remaining $1000?

[Anonymous]

Anonymous wrote:Can someone walk me through this? When you say you are matching their income in a Roth, how does this work? I didn't think you can put more than their earnings in a Roth. So if the kid earns $3000 and puts in $2000, how can you match that since they would then have contributed more to the Roth then their taxable earnings? Or are they contributing $2000 and you the remaining $1000?

This pp. people are using the word “matching” loosely

[Anonymous]

Anonymous wrote:When my kids' W-2s come around February, I contribute that exact amount into their Roths for the previous year (you can contribute up until April 15).
So in Feb 2023, kid's W-2 says they earned $2,947 in 2022. I contribute $2,947 to their Roth and check the box that says "contribution for 2022". I should be doing this as their pay checks come in but ....

There's no match whatsoever. Except maybe that I they earn $2,947, then I deposit a "matching" amount. Kids keep their money for college spending money or other things they're saving for.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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.

This makes no logical sense. They haven't formed a habit of retirement savings because they haven't saved the money. The parents gifted it to them. The behavior is the action taken by the parents.

Sure, it's nice to see a big account that your parents gave you, but don't mistake what it is. A gift.

DP. My parents started fully funding my IRA when I was in my 20s and the idea of retirement seemed impossibly far away. It was not a financial stretch for them to do it but it was one of the few financial things they discussed with me so it made a huge impression. My parents did not do a lot to help me with expenses after I left home but they were handing over thousands every year for my retirement; it was on my mind as soon as I had kids. We are now fully funding our teen's IRA and discussing it with them. You are right that it is a gift, but if we were not able to fully fund it I think I would try to put some amount in, and/or encourage him to do the same, just to hammer home that it is an important thing to think about and prioritize now.

If you simply can't, and they can't, that's another story, but if they are saving for college they could direct some of that to an IRA. And, to the best of my knowledge, money in IRA is not considered when colleges are looking at financial aid, but parent savings and child savings are considered.

Do you hear yourself? If your parents were contributing to your retirement in your 20s they absolutely were helping you with expenses because you couldn't save otherwise. Some of us managed our own expenses and were able to start retirement in our 20s. Yours is just one more example of a gift.

DP. What are you arguing about here other than your own anger? PP clearly says the thing you are trying to get them to concede: it was a gift.

[Anonymous]

Anonymous wrote:Can someone walk me through this? When you say you are matching their income in a Roth, how does this work? I didn't think you can put more than their earnings in a Roth. So if the kid earns $3000 and puts in $2000, how can you match that since they would then have contributed more to the Roth then their taxable earnings? Or are they contributing $2000 and you the remaining $1000?

Pretty sure what people mean is if kid earns $3000, they put all $3000 in then mom matches it and gives kid $3000 to spend or put in a regular savings/checking account.

[Anonymous]

Grandma gave her money to start a Roth when she turned 18.

[Anonymous]

Anonymous wrote:Grandma gave her money to start a Roth when she turned 18.

that's sweet. did she have earned income that year?