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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=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. [/quote]

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

This is not correct[/quote]

(DP) It is for self-employed income like babysitting, but not because of the Roth directly. If they earn that much babysitting, they already should be filing tax forms. If they are "self-employed," like teen babysitting, free lance swim lessons, tutoring, etc., they are supposed to report and pay taxes if they earn over $400 per year, and if from one source, then that source should be issuing a 1099 if they are paying the kid more than $600 per year. I'm guessing in practice not everyone files for their kids who earn over the $400 threshold, so a Roth may draw attention if all of the self-employment rules are not being followed.

It is easier to keep appropriate records when it is a job with a W-2, as opposed to self-employment income. Typical teen jobs with W-2 wages don't earn enough to meet the taxable threshold of $12,950 per year for such income, and so those kids don't need to file tax returns. But it is easier to track and prove when you get a W-2. So for every Roth contribution the kids make, they have a W-2 to back it up, even if they do not earn enough to have to file a tax return.

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