I would open a savings account at any bank with the money they earned and teach them about managing money. By virtue of their age, it will be a custodial account.

If you have the means, I would also open a Roth IRA for them and match whatever they have earned. It doesn’t have to be their money that funds the Roth, it just has to be their earned income so in this case, you could put 2,000 into the Roth.

They obviously don’t need a tax deduction, but it will grow to millions in tax free money when they are able to retire.

Anonymous wrote:I know folks love the Roth IRA, but still a bit confused why do it for a teen.

Assuming normal teen jobs, they won’t pay any tax on their investments for years, but may need to tap into the $$$s for their own expenses.

Are you folks doing this because your teen just doesn’t need the money (ie, you the parent will fund any day-to-day and don’t expect teen to contribute to college)…or some other reason?

Yes you have to assume the child will not need the money. Investment strategy for tax free growth on all future gains. By starting early the small amounts today can be millions in 40 years. Most parents on DCUM fund their kids lives so no they don’t need the spending money.

Anonymous wrote:I’d be pissed if I earned money and then my parents put it into an account I can’t access. It’s their money. They should have at least some of it for themselves.

It shouldn’t be all and it should be your decision. My guess is op will gift their kid the cash.

Anonymous wrote:A checking account, or savings. I think a Roth/ira is a secondary choice. My kid needs to earn money and learn how to spend it. my job as a parent is to teach them to live within their means and understand earnings/spending. There is a small window / opportunity to help your kids learn this. A Roth can come later

If you forget the lesson on compounding growth, your kids are failing one of the top three lessons - pay your bills, direct deposit savings, invest early and often.

Living within the means, as a live at home HS teen, should be ~$25 a week. Clothing should be as needed.

My 12 year old opened her first investment account this summer with $500. I demonstrated typical market growth, watched videos, etc and she realized the importance and wanted to open the account.

Anonymous wrote:I know folks love the Roth IRA, but still a bit confused why do it for a teen.

Assuming normal teen jobs, they won’t pay any tax on their investments for years, but may need to tap into the $$$s for their own expenses.

Are you folks doing this because your teen just doesn’t need the money (ie, you the parent will fund any day-to-day and don’t expect teen to contribute to college)…or some other reason?

Compound interest.

I’d be pissed if I earned money and then my parents put it into an account I can’t access. It’s their money. They should have at least some of it for themselves.

I know folks love the Roth IRA, but still a bit confused why do it for a teen.

Assuming normal teen jobs, they won’t pay any tax on their investments for years, but may need to tap into the $$$s for their own expenses.

Are you folks doing this because your teen just doesn’t need the money (ie, you the parent will fund any day-to-day and don’t expect teen to contribute to college)…or some other reason?

Not op.

My understanding is that FAFSA doesn’t look at the child’s Roth IRA, but the CSS profile used by private colleges will and those colleges may take it into account as a student asset. Correct?

Anonymous wrote:A checking account, or savings. I think a Roth/ira is a secondary choice. My kid needs to earn money and learn how to spend it. my job as a parent is to teach them to live within their means and understand earnings/spending. There is a small window / opportunity to help your kids learn this. A Roth can come later

Disagree. Roth will grow and more than money they save later on. Give them a head start.

A checking account, or savings. I think a Roth/ira is a secondary choice. My kid needs to earn money and learn how to spend it. my job as a parent is to teach them to live within their means and understand earnings/spending. There is a small window / opportunity to help your kids learn this. A Roth can come later

Anonymous wrote:Problem if they need to take loans for uni. We put all ‘wages’ into parents account so kids can say ‘zero’ earned on FAFSA. Still pay proper taxes. Each have lucrative small businesses - tutoring and day care.

If your kids are filing taxes on "lucrative small businesses" and then saying 'zero' earned on FAFSA because they're putting the earnings in your account, you're not as clever as you think.

Problem if they need to take loans for uni. We put all ‘wages’ into parents account so kids can say ‘zero’ earned on FAFSA. Still pay proper taxes. Each have lucrative small businesses - tutoring and day care.

Ira is correct. My 19 year old thru 18 years old has almost $19,000 in the ira.

Roth.

DD is 16 and made $2000 this summer. Vanguard says we can open a "custodial" account, either a Roth IRA, or a Unified Transferred Minor Account.

Guess we could also start her a bank account? She likely will make a similar amount next summer, but not more.