Where should teen put summer job money?

[Anonymous]

He plans to make about $500, and I want to show him how it will grow when he doesn't use it. When I was his age I opened CDs with my money, but the return doesn't seem great on those these days. Is a savings account really the best bet?

[Anonymous]

if its legit money, put it in an IRA and have a talk with him about compounding interest

[Anonymous]

Savings account won't pay out much either. I have a savings account that I started 5 years ago with $5K and it has literally made $30 of interest in that time. It's part of my emergency fund (and keeps me from paying fees on my checking account) so it needs to be liquid.

[Anonymous]

Don't do what my parents did and invest it in penny stocks so I can find out one day the stocks are worthless and the money is gone.

[Anonymous]

Anonymous wrote:if its legit money, put it in an IRA and have a talk with him about compounding interest

This or college fund.

[Anonymous]

Anonymous wrote:if its legit money, put it in an IRA and have a talk with him about compounding interest

Roth IRA, not IRA. Fidelity is the easiest.

[Anonymous]

An IRA is such a good idea that I told my kids I would match what they put in an IRA. So he can keep half his money and you give $250 ... and when he's 59.5 he'll have many $1000s from the $250.

[Anonymous]

You really are not going to be able to show "growth".

Every time he makes money put 1/2 in savings and 1/2 he can spend or 3/4 in savings and 1/4 he can spend.

Eventually he will have a couple thousand $$$.

If you are making money grow substantially from 13-18 (5 years) please ... tell ME how.

Accumulation is something you can show from saving, growth ... not so much.

[Anonymous]

My DC opened a Roth IRA last year for a portion of his summer earnings. He had more to invest but $500 is a good start. You can contribute up to your earnings (to a max of $5500).

[Anonymous]

We let our kids spend/save what they earned. They are responsible for their personal spending year round - so they have to budget for that.

[Anonymous]

I was going to say Roth, but it's only $500. Still, I'd help him open up one and contribute something every year he makes money. He might postpone opening up account on his own, but once it's open, he might add more as an adult.
I also like the idea of "mom/dad bank". Open a checking and calculate interest every month on the balance and give him the interest to add to the bank account, also any allowance. He knows how much he has, kind of knows how much is coming and pay him 5% interest and have him calculate it. If you are waiting for the banks to pay him interest, it might never happen and he will not learn interest or compound interest.

[Anonymous]

Anonymous wrote:An IRA is such a good idea that I told my kids I would match what they put in an IRA. So he can keep half his money and you give $250 ... and when he's 59.5 he'll have many $1000s from the $250.

Uh doesn't it all need to be all earned income? You can't match it or give any of it into the IRA itself...

[Anonymous]

Why not let him save and spend it? With such little money, and low interest rates, he won't really see any growth. When I was that age, my dad told me he would match whatever I had saved every year. This was when I made 5 bucks an hour babysitting, so not huge amounts of money. It became my 'fun money' for college.

[Anonymous]

That's my point on the IRA match from parents. Kid makes $500. Kid can put $500 in IRA. But maybe kid would also like to spend some money. So my deal with my kids is hey - go ahead and spend half your money and I will give you $250 so you can also put $500 in your IRA. In other words if they put half their earnings in IRA, I will match. Totally allowed.

[Anonymous]

OP here. Thanks for all he feedback. I think we are going with letting him feel what it's like to have $, then hoping he'll come to us and ask us to add it to his 529. At least then he can see that money grow a bit. Thanks for all the input.