Investing in our children is a great way to help bring about a better and brighter future for everyone, and we work toward these goals in a variety of ways—from extracurricular activities to emotional support. Of course, teaching our younger generations about smart money habits and saving will also make a big difference in their life!
There are plenty of options for helping a child embrace long-term success. Fostering a good work ethic is a great place to start, but there can also be extra incentives by working with a Roth IRA. These tips can help you start thinking outside of the box.
Want to Help with a $1 Million Retirement?
It may sound a little strange to start thinking of your child’s or your grandchild’s retirement savings when they haven’t even graduated from high school, but as the old adage goes, it’s never too early to plan ahead. The sooner you get the ball rolling, the better off the child will be for expanding their savings.
By opening a Roth IRA for your child as soon as they begin to earn money, you can help them build a tax-free retirement account that’s sure to give them a significant sense of security as they grow up. The numbers don’t lie. If their investments can reach $2,500 by the age of 19, then they should be looking at a $100,000 fund at age 67. Based on an eight percent rate of return, the amount of money will grow forty times. So if you reach an investment of $25,000 before graduation, then they’ll have one million dollars waiting for them at retirement.
Retirement Savings Tips for Your Child’s Future
Obviously reaching that million-dollar savings goal is easier said than done. But when you plan appropriately, it’s quite feasible. There are a handful of tactics that can help your child reach that $25,000 mark for their Roth IRA.
First, they will need to have realistic ways to earn their own income. Getting hired for a job with in high school will likely be when they can earn the most money, but even tracking the cash-based income from pet-sitting or mowing the neighbors’ lawns while they are younger can make a big impact. You just need to track that income appropriately. It may even be worth filing a tax return just to prove their earnings.
As they build their savings skills individually, you can also considering making your own contributions to the child’s Roth IRA account. Parents, grandparents, and anyone else who chooses can add money to these types of accounts—so long as it doesn’t exceed the amount that the recipient earned on their own. From there, it’s just a matter of tracking your progress from year to year. The contribution maximum is currently at $6,000 annually, which is why it pays to start early.
Coordinating with other loved ones and determining the right course for your child’s contributions is a wonderful way to help them build confidence in their future. Knowing that their retirement savings plans are already underway can help ease their mind as they continue finding their way in life and start their own career. If you have questions on how to get started, contact NSO and Company so we can help you run the numbers!