It’s no secret that Roth IRAs are one of the best, if not the best, financial vehicles for young savers to start saving in. The earlier you begin, the more time you have for tax-free compounding. That’s only magnified when our kids or grandkids can begin saving as early as their teenage years.
We have also seen clients use Roth IRAs as a tool for financial education as they launch their kids. I’ll share an example we saw this summer.
One of our clients has a teenager who began working a summer job spinning pizzas. Now that they had earned income, they were eligible to begin funding a Roth IRA. Instead of simply funding the Roth (which would have been a great gift in itself), they told their teen that they would match any contributions they made.
This kind of approach creates great opportunities to engage your kids in conversations around financial literacy.
- How does compounding affect your savings?
- How does investment growth create additional income?
- Why is tax-free growth particularly valuable in the long run?
- What gets you motivated to make saving a part of your planned budget?
Examples like this are an excellent use of both capital and influence in our kids’ lives. The goal is to launch trustworthy, competent stewards of wealth. Whether they are still under your roof or out building their own lives, be intentional to engage in the area of financial literacy. If you’re looking for effective ways to engage, we’re always here to help.
