Your teens summer earnings can’t buy love, but they can buy a bit of retirement security. In my last column, I extolled the virtues of opening—how To Invest Money As A Teenager perhaps even contributing to—a Roth IRA for a working teenager. Your child needs to earn money if he or you are going to contribute to an IRA on his behalf. The deadline for making the contribution is April 15, 2015. But you can start sooner, even if your teen hasn’t yet earned the money on which you will be basing the IRA contribution.
If the kid doesn’t earn enough to justify your contributions, you can withdraw the excess with relatively little in the way of paperwork or penalties. Roth IRA on her behalf, using her Social Security number. Not every brokerage or mutual fund company that will open a Roth IRA for an adult will do so for a minor, but many of the larger ones will, including Vanguard, Schwab, and TD Ameritrade. Once she ages out, the account will then need to be re-registered in her name. To encourage your teen to participate, you might offer to match every dollar he puts in.
How an adult should invest an IRA depends upon the person’s goals and risk tolerance—the same is true for a teen. You can help set those parameters by pointing out to your child that, since he’s unlikely to retire until his 60s this is likely to be a decades-long investment, and enduring short-term downturns is the price for enjoying higher potential long-term gains. Ask your child: Which would you rather? No doubt, your kid will choose the bigger number. But you also want this to be a lesson in the risks involved in investing. Some teenagers will be perfectly fine accepting the risk. You also might explain that there are options that will not decline in value at all—such as CDs and money market accounts. But should he choose those safer options, he’ll be trading off high reward for that benefit of low risk. So his money will actually be worth less by the time he’s ready to retire.
How To Invest Money As A Teenager Expert Advice
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Some risk, therefore, will likely be necessary in order to grow his money in a meaningful way. Assuming he can tolerate some fluctuation, a stock-based mutual fund is probably the most appropriate and profitable strategy—especially since a fund can theoretically offer him a ownership in hundreds of different securities even though he may only be investing a few thousand dollars. These offerings are geared toward a specific year in the future—for instance, one near the time at which your child might retire. Target date funds are usually a portfolio comprised of several different funds. The portfolio allocation starts out fairly aggressive, with a majority of the money invested in stock-based funds, and much smaller portion in bond funds or money market accounts. As time goes by—and your child’s prospective retirement draws nearer—the allocation of the overall fund gradually becomes more conservative. The value of the account can still rise and fall in the years nearing retirement, but with likely less volatility than what could be experienced in the early years.
Of course, if you choose a brokerage account for your child’s Roth IRA, you have the option of purchasing shares in a company that might be of particular interest to your kid. He’s also the author of Make Your Kid a Millionaire. Money may receive compensation for some links to products and services on this website. Offers may be subject to change without notice. Quotes delayed at least 15 minutes. Market data provided by Interactive Data.
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A link has been sent to your friend’s email address. A link has been posted to your Facebook feed. Millennials move in with mom and dad to save for a new home. A gay pride flag flutters with the American flag at Seattle’s City Hall for the month of June to recognize the LGBTQ community during pride month, Wednesday, June 14, 2017, in Seattle. The Millennial generation is known for its distrust of Wall Street and lack of self-assurance when it comes to money, investing and getting ahead. But LGBTQ Millennials are even less confident than their straight peers when it comes to managing their finances and achieving the American Dream, according to a survey that online brokerage TD Ameritrade provided exclusively to USA TODAY.
How To Invest Money As A Teenager More Information…
While many past surveys have compared the money habits of men and women, or married Americans vs. While some similarities existed — both groups saved a similar percentage of their monthly incomes, were nearly as likely to invest in stocks and followed traditional career paths — there were also glaring disparities. Those differences suggest that LGBTQ Millennials are lagging behind their straight peers in key areas such as pay, financial literacy and confidence in their long-term financial futures. LGBTQ Millennials were also less optimistic about reaching their financial goals and saw themselves as lacking the expertise to invest for the future. Less than four in 10 LGBTQ respondents expected to “feel financially secure in retirement,” compared with half of straight Millennials. Similarly, only about a quarter of gay Millennials viewed themselves as “knowledgeable” about investing, vs.
And that lack of confidence is holding them back, says Lule Demmissie, managing director of retirement and long-term investing at TD Ameritrade. It is clear that when individuals feel less secure, it impedes their ability to improve their finances,” Demmissie says. Part of the financial insecurity felt by LGBTQ Millennials may stem from the fact that they earn less money than their straight peers. The wide discrepancy in household pay is likely due in part to the fact that straight Millennials are more likely to be married, raising the odds of a two-income household. The income gap,” says Demmissie, “can’t be overlooked. In fact, taking home less pay each year occurs even though LGBTQ Millennials are more likely to supplement their income with so-called “side hustle jobs,” the TD Ameritrade survey found.