How to Help Teens Turn Summer Jobs into Investment Opportunities

For teens with a summer job, few things are further from their minds than saving for retirement. But parents and guardians might be advised to help them open a Roth individual retirement account.

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For teens with a summer job, few things are further from their minds than saving for retirement. But parents and guardians might be advised to help them open a Roth individual retirement account because investing early means much larger payoffs down the line. Investing at age 19 versus 25, for example, could yield as much as $330,000 in extra income by the age of 67. And investing $5,000 alone--perhaps the income from a summer job--could mean $50,000 at the current 5% annual interest rate. Turning summer cash into an investment opportunity is a nice way to reward the work of young people we love.

What's the Big Idea?

Roth IRAs are good investments because they are stable as well as flexible. There is no tax on cash withdrawals from the account and compounded interest returns are steady at 5%. For many, paying for college is a more timely concern than retirement, but at least IRAs won't count against you. FAFSA documents don't ask about IRAs and neither do most colleges. "Paying for college is enormously challenging, but that problem may end up paling in comparison to what will happen when millions of pensionless people who didn’t save enough in their workplace retirement accounts and I.R.A.s start running out of money."

Read more at the New York Times

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