Are you looking for a smart way to help your kids start saving for the future? Look no further than opening a Roth IRA for them this summer. At Extreme Investor Network, we believe that starting early is the key to building long-term wealth.
Certified financial planner Carol Fabbri, managing partner of Fair Advisors, highlights the benefits of Roth IRAs for teenagers. These accounts are “triple-tax efficient” because they are funded with after-tax dollars. Teens often earn less than the standard deduction, so they won’t owe taxes on the income used for contributions. Additionally, Roth IRAs offer tax-free growth on investments, and withdrawals in retirement are generally tax-free.
Imagine if a 15-year-old invested $500 this summer – they could potentially have almost $10,000 when they retire in 50 years, assuming a 6% growth rate. The power of long-term compound growth only magnifies the sooner you start saving and investing. According to a recent survey from Junior Achievement and MissionSquare, more than 8 in 10 teenagers are already thinking about retirement, but most mistakenly think savings is the best long-term strategy.
At Extreme Investor Network, we understand the importance of educating our youth about financial literacy. That’s why we recommend parents open a “custodial IRA” for their children. This is a retirement account for minors, where the parent manages the account and investments until the child reaches the age of majority. While there’s no age minimum for Roth IRA contributions, children must have earned income from a job to qualify.
We also suggest offering a “match” to incentivize contributions to your child’s Roth IRA. CFP Tammy Wener, principal of RW Financial Planning, is a huge fan of kids opening Roth IRAs with summer income. She provides a match to encourage contributions from her own children. Just remember, the child’s Roth IRA contribution and parent match cannot exceed the child’s earned income for the year.
If you’re interested in learning more about how Roth IRAs can benefit your kids and help them start saving for the future, visit Extreme Investor Network for expert tips and advice. Don’t miss out on this opportunity to set your children on the path to financial success.