Author Topic: Best savings options for kids earning money  (Read 627 times)

St Elmo

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Best savings options for kids earning money
« on: September 17, 2021, 04:59:39 PM »
My son recently got his first job at age 15, making ~$10/hour for around 10 hours per week. I hope/expect he'll work/earn more during the summer. It's very likely he'll attend college (tuition will be about $6000/year, plus living expenses). There's a decent chance he'll get some academic scholarships, although I'm not counting on it. My wife and I haven't decided yet whether/how much we'll contribute towards his college expenses, but in any case we'd like him to have a financial stake in his educational costs.

Currently my thinking is to set up an arrangement so that whatever amount my son can put into long-term savings before he graduates high school, that's how much we'll contribute towards his college expenses (we'll do so via a 529).

I'd like to get some feedback from the MMM community about the investment order for a teenager (or maybe I'm overthinking this and it's the same as the standard investment order post on these forums). My thinking is that since his income is so low he should put as much as possible (up to $6K/year) into a Roth IRA, and then the rest into an after-tax brokerage. Any other suggestions, or things we should be considering as we're trying to help him get off on a solid financial footing?

Among other things, I plan to have him read through the MMM blog posts as part of his financial education before he leaves the nest, but currently I don't think he has enough interest to do his own research about investment options. On the plus side, he is very frugal and seems perfectly content to put substantially all his earnings into savings (I think his $15/month cell phone bill is his only regular expense).

Thanks in advance! 

MDM

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Re: Best savings options for kids earning money
« Reply #1 on: September 17, 2021, 06:10:42 PM »
I'd like to get some feedback from the MMM community about the investment order for a teenager (or maybe I'm overthinking this and it's the same as the standard investment order post on these forums).
Looking at the Investment Order for a minor, it seems one quickly moves down to step 4, Max Traditional IRA or Roth.  Given his likely 0% federal tax rate, Roth it is. :)

MaybeBabyMustache

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Re: Best savings options for kids earning money
« Reply #2 on: September 17, 2021, 06:13:26 PM »
I have teenagers of similar age. One starts his first "job" (soccer ref'ing) tomorrow. Our current approach is that we will match his Roth savings. It's not a ton of money, and he's really interested in learning about investing, so this seems like a good way to seed that interest.

ixtap

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Re: Best savings options for kids earning money
« Reply #3 on: September 18, 2021, 07:57:31 AM »
One advantage of Roth is that it won't impact any college aid he might be eligible for.

The other is obviously the tax free growth as he starts earning more. If you want to encourage long term savings, Roth is ideal.

HamsterStache

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Re: Best savings options for kids earning money
« Reply #4 on: September 25, 2021, 07:33:54 PM »
It will be a while before my kids are old enough to be earning income, but I plan to encourage them to open a Roth IRA when they do - depending on our own financial situation at the time I will probably consider matching their income with contributions so that they will have money for themselves now also.