Investing for kids

[IntheDraft6]

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I have a 16y/o son who is starting a job and earns money by doing work around the house. I think it would be a great idea for him to start putting money away. What is the best way to go about this? Could he start a Roth? What brokerages have the least restrictions (lowest opening deposit and monthly requirements)?

Thanks.

 

[dpmd]

I had a 401K from a job I started working at when I was 15 (don't think they started the profit sharing part, which is all I qualified for, till a few years later). I don't think there would be any restrictions on it due to his age. I rolled it over into a schwab IRA when I left that job years later, because it was the same firm that had been handling the money before. I think you can open an account with 1000 or less if you set up monthly deposits (and no monthly fees).

Actually looks like there is an account you can manage until he is 18 or 21 in case they say he can't open his own.

If he goes to college any money in his account will be counted against him in terms of need based aid, but then again he will have less need because of it.

 

[IntheDraft6]

I had a 401K from a job I started working at when I was 15 (don't think they started the profit sharing part, which is all I qualified for, till a few years later). I don't think there would be any restrictions on it due to his age. I rolled it over into a schwab IRA when I left that job years later, because it was the same firm that had been handling the money before. I think you can open an account with 1000 or less if you set up monthly deposits (and no monthly fees).

Actually looks like there is an account you can manage until he is 18 or 21 in case they say he can't open his own.

If he goes to college any money in his account will be counted against him in terms of need based aid, but then again he will have less need because of it.

Thanks for that. Scottrade seems to have a similar thing with some lower fees. I'll have to take a look and see which one is better. I'm not too worried about his financial aid, as doctor we're going to to get hosed anyway.

 

[dpmd]

Yeah, just mentioned it so it isn't a big surprise.

I think it is a great idea to get started early. The money I started out with in that profit sharing account has certainly grown nicely (although lucking out on a small company that got aquired by a big one helped by doubling my money)

 

[IntheDraft6]

Yeah, just mentioned it so it isn't a big surprise.

I think it is a great idea to get started early. The money I started out with in that profit sharing account has certainly grown nicely (although lucking out on a small company that got aquired by a big one helped by doubling my money)

Nice. Let me know next time you plan on doubling your money. I want in, lol.

 

[Igor4sugry]

I'm pretty sure that a RIAs/401k will not count in the EFC calculation for financial aid whether its in your name or your son has one.

 

[The White Coat Investor]

You can do a Roth IRA. You can open one with Vanguard for only $1000. I believe with regular deposits you can do one at T. Rowe Price for only $100. That's what I would recommend.

Remember this has to be earned income declared on taxes. So if you're paying him to do chores around the house, you've got to comply with the requirements of being an employer....i.e. withhold social security taxes etc.

But if he has a job down at the ice cream shop, that money is all fair game to go into a Roth IRA. If you're really nice, you'll match his earnings. For example, if he makes $3K this summer, you'll put his $3K in a Roth and give him $3K of your money to do what he wants.

Remember a Roth IRA is for retirement. If you want him to be saving money toward college, use a 529 or a Coverdell ESA. If you want it so he can buy a car or a house downpayment in a few years, use an UGMA account.