Teens savings? Where?

[CatchingFire]

We are (admittedly belated) establishing a 50% savings minimum for our teens (13 and 15) on all cash inflow.  We are planning a parental match of some sort to enhance the "holy cow, snowball effect" and get them excited about saving/investing.  My question is what instrument would be best for this type of savings/investing?  Savings accounts are easy, but earn hardly any interest.  I've looked at Schwab and local credit unions.  .1% is about it.  Mobile banking options would be awesome though. 

Income will be sporadic from them, but we're still considering something like Betterment?  We would likely foot the bill for the $3/mo fee each kid.  It is highly unlikely they will be auto depositing anything, but the great user interface and beginner-friendly feel of the site may be worth it??  Face punch?  Thoughts?  Other ideas?

[GizmoTX]

Synchrony (online) is paying about 1%.

[Paul der Krake]

On the first of every month, add 1% (or any other easy to compute number) to their bank balance. Yes, you're cheating and giving them an unrealistic and artificial return on their money. Make sure they know it and explain why you're doing it.

[MDM]

We are (admittedly belated) establishing a 50% savings minimum for our teens (13 and 15) on all cash inflow.

If it is "earned income" cash flow, see http://forum.mrmoneymustache.com/investor-alley/where-to-start-a-child's-roth-ira-with-very-low-income.

Sure you could have started earlier, but a pat on the back is more appropriate than a face punch for getting your kids started at ages 13 and 15.

[CatchingFire]

Thanks everyone.  My 15-year-old will likely have employment next summer, but thus far this is not earned income from an employer.  Mostly it is gifts from family, earnings for grades and some chores around the house that they do in addition to their regular chores.  We will definitely get them started with an IRA setup once they are earning employee income.

Synchrony looks good, but the lack of ATM reimbursement makes me wonder if I'd just be better throwing in the 1% myself and setting them up with a local credit union or Schwab (who reimburses for ATM fees).  The idea is obviously NOT for them to take it out anyway, so I'll have to consider whether thats even an issue.

So, no one has mentioned Betterment...  I know the $36/year is high compared to their automated deposit services accounts, but I'd love to get them interested in investing too.

[CatchingFire]

Schwab requires all account holders to be over age 18, even joint accounts, so that's out. 

[MDM]

Schwab requires all account holders to be over age 18, even joint accounts, so that's out.

Let's try once more: http://forum.mrmoneymustache.com/investor-alley/where-to-start-a-child's-roth-ira-with-very-low-income/msg473584/#msg473584.

The key word is "custodial".

Although, the thread was specifically about Roth IRAs.  The 18 year old limitation may well apply for taxable, even custodial, accounts.

[CatchingFire]

Schwab requires all account holders to be over age 18, even joint accounts, so that's out.

Let's try once more: http://forum.mrmoneymustache.com/investor-alley/where-to-start-a-child's-roth-ira-with-very-low-income/msg473584/#msg473584.

The key word is "custodial".

Although, the thread was specifically about Roth IRAs.  The 18 year old limitation may well apply for taxable, even custodial, accounts.

I'm looking at Savings accounts at the moment as neither child is earning income from an employer.  My impression is that earned income is a requirement for a Roth IRA.  No?

[MDM]

I'm looking at Savings accounts at the moment as neither child is earning income from an employer.  My impression is that earned income is a requirement for a Roth IRA.  No?

Correct about "earned income is a requirement for a Roth IRA."

See http://www.schwab.com/public/schwab/investing/accounts_products/accounts/college_savings/custodial_account.  I had the same impression as you until the word "custodial" was added to the mix.

[RFAAOATB]

Aren't 529 plans the go to answer for how to invest for children?  Even teens can take a few years to get some returns in.

[CatchingFire]

I'm looking at Savings accounts at the moment as neither child is earning income from an employer.  My impression is that earned income is a requirement for a Roth IRA.  No?

Correct about "earned income is a requirement for a Roth IRA."

See http://www.schwab.com/public/schwab/investing/accounts_products/accounts/college_savings/custodial_account.  I had the same impression as you until the word "custodial" was added to the mix.

Thank you very much for the link.  The Schwab rep didn't even mention this when I called.  What a goof!  I'm definitely looking into this.

[CatchingFire]

Aren't 529 plans the go to answer for how to invest for children?  Even teens can take a few years to get some returns in.

Yes!  We already have a fairly fully funded 529 for the kids though. In conjunction with a 50% tuition discount through my husband's employer, it's more than enough already.

After looking around, I think we will open a savings account with Barclays (pays 1% and has special account features for minors) and perhaps open the Schwab custodial brokerage account above or simply wait until they are earning income to start a Roth somewhere.

Thanks all!

[MayDay]

We did regular custodial accounts at our local bank.  We pay 1% interest per month.  This is especially motivating for my 7 year old who is great at math.  At the end of the month we'll round up any spare money he has lying around to deposit, so he can maximize his interest payment.