Greetings all,
My 18 y/o son, who is a senior in high school, received his W2 yesterday and had an eye-opening realization--he earned approximately $16,000 last year, and he spent a good portion of that on things he doesn't even remember. He certainly didn't "blow" it all, because he bought a car (2003 Nissan 350z for $6,000--Mrs. MNC and I paid for it upfront and he paid us back approximately $3,000 so far) and he has saved approximately $3,000 in his savings account. He also pays me every month for his car insurance and cell phone, but what he doesn't know is that I am stashing those payments for him and plan to give it to him after he finishes school.
With that said, he and I talked about how he could have paid off his car, met his goal of having $5,000 in emergency / liquid savings and still have had fun money left over. I have talked to him previously about starting a retirement account, but he is one that struggles to look one month ahead let alone many years ahead. I regularly bring up discussions about people here retiring really young and not having to worry about a job, hoping some of it sinks in--and last night as we talked about his W2, we started discussing a retirement account again.
He liked the idea of the Traditional IRA because it would reduce his taxable income and give him a bigger refund, or bonus in his mind. As I think about it, I would tend to direct him towards a Roth IRA now at this age when his taxable income is lower.
I've read pros and cons of both, so I thought that I would come here and solicit some feedback from people that have either been in this situation with their children or would just like to share insight based on your own experiences. Right now he is focusing on getting his savings up to the $5,000 target but he will be able to do an initial deposit of $1,000 into an IRA, which is still the minimum for quite a few places I believe, but then he would ideally send a conservative amount on a monthly basis as an automatic transfer with potential for periodic transfers of larger amounts. His earnings do fluctuate as his job is PT but he picks up more hours during the summer, school breaks, and on weekends.
Other than reaching my own FIRE date, there are not many things that would make me happier than to see both of my boys (his brother is 15) be able to be FIRE at as early an age as possible so I want to make sure that I am giving the best guidance to him. If I have left out any pertinent details, please let me know.