DC1 made money this summer at hir internship. A little over $2000 to be exact.
That means that DC1 is eligible to put a little over $2000 into a Roth IRA retirement account this year. Starting retirement savings at 15, even if it’s a small amount, even with the stock markets being volatile, could have a nicely positive impact on hir retirement funds, especially if the stock market continues its pattern of returning more than inflation takes away over the long-run.
We’ve left the $2000 in hir savings account (zie isn’t eligible for financial aid right now anyway because DH and I make too much and have too much unprotected wealth– if this wasn’t the case it might make sense for college financial aid purposes to put hir money directly into protected retirement savings since colleges are greedy with student assets) and have taken $2K of our money to put into an IRA for DC1.
It turns out that it is not as easy to open up an IRA for a minor as it is for an adult. If you try to set up an account online it will say no! In the end, we had to do it over the *phone* with Vanguard. But the Vanguard person took care of things and walked DH through what needed to be done. (This would have been more annoying if I had to do it myself.)
Once the account was open, it was attached to DH’s main Vanguard account. At some point that will have to be disentangled, but DC1 will still be under 18 for a few more years. If you don’t already have a Vanguard account and you want to set up an IRA for your child then you will probably want to do this with whoever your actual provider is. (If you don’t have a provider, have you considered getting yourself annual IRAs?) (Disclaimer: We are not financial advisors– speak with a financial advisor with fiduciary responsibility and/or do your own research before making life changing money decisions.)
DH had them direct money to their money market account. After it posted, we tried to buy VTSAX, the Vanguard total stock market index, with it, but they said no! You must have at least 3K to do that. So instead we bought VTI which is the Vanguard Total Index ETF (exchange traded fund) which didn’t have a dollar minimum amount. The ETF tracks the Index, so hopefully it provides about the same outcome 50+ years down the line. No trading fee for this with Vanguard which was nice.
Hopefully the magic of compounding tax free will turn this $2K into a good start on healthy retirement funding for DC1. Though just having an account and getting into the habit of maxing out retirement savings will have an even bigger return down the road.
When did you start saving for retirement? Did you have a summer job as a kid? If applicable, do/did your kids have earnings under the age of 18?