Teenage saver--where to start investing?

[AMandM]

I just want to check some reasoning with more expert/experienced people.

My 19yo son and I were talking about saving and investing, especially about retirement saving and the magic combination of time+compound returns.  He said he doesn't see the point of a retirement account at his age. He's all for saving and investing, but he doesn't think it's prudent to put his money into an account that restricts his access to it. He figures that he will very likely want at least some of his money relatively soon (next 5-10-15 years), to start a business or put a down payment on real estate. I agreed with him that what he wants is a non-tax-sheltered account with Vanguard where he can just buy index funds.  He's a student with a part-time job and his income is so low that he pays almost no income tax.

Are we missing anything?

[Dollar Slice]

How about a Roth IRA? That way if he wanted some of the money in 5/10/15 years he can still access his contributions tax- and penalty-free, but the investment gains will stay in the account for his tax-advantaged retirement. Kind of splits the difference between saving towards retirement and saving for the near-term. Plus if he ends up not needing the money after all, it's tucked away in a tax-advantaged account and will continue compounding tax-free.

[MDM]

My 19yo son and I were talking about saving and investing, especially about retirement saving and the magic combination of time+compound returns.  He said he doesn't see the point of a retirement account at his age.
...
Are we missing anything?

The Power Of Compound Interest. 

Good luck getting a 19 year old to think long term. ;)

[AMandM]

He understands the magic. He just didn't see why it should happen in a retirement account.
The Roth IRA is a good idea. Looking it up now, I realize I had the wrong idea about how it worked.
Thanks!

[PDXTabs]

A taxable account might be his best bet. If he wants some safe money be sure to mention the I series savings bond.

[MDM]

Taxable would be better than Roth only if he wants to withdraw the entire amount (contributions plus gains) in the relatively near future.

But then that's not a long term investment.

For a long term investment, the lack of any tax on the Roth account (and the assumption that returns will be positive) make the Roth better than (at worst, no worse than) taxable.

[MrThatsDifferent]

Explore the 3 prong approach: a tax advantage retirement account (plenty of articles about how to access them early), a taxable index investment account and a high interest savings account that’s online. His goal is to avoid fees and debt as much as possible and the earlier he can save his money, invest and let it grow, the better he’ll be later. I wish I knew this stuff at 19 and I was better set up. Financial security makes life easier. Help him understand the tax advantages of retirement accounts, it allows him to keep more of his money. And get him to read all of the MMM articles and Go Curry Cracker.