Investing for teenager about to start a part time job

[summertime]

Hello!

I was wondering if you have any advice or what would probably be the best way to start saving/investing for a teenage about to start a part time job.

Thanks for you advice!

[jIM_Ohio]

I would look to do the following-

1) state the reason for investing
a) retirement
b) college
c) prove it can be done
d) improve net worth

1a) I would recomend a Roth IRA
1b) I might suggest a Roth IRA, but ask you to think about it
1c) and 1d) would be taxable brokerage accounts.

I would suggest saving 10% of gross pay and setting it aside.
If you gross $500/week, then $50/week gets put into an investment or savings acccount of some kind.

Much of investing is learning the discipline to set money aside regardless of circumstance. Some people call this "pay yourself first".

[Spud]

What is the P/T job for? Is it to earn college money? Car money? Starting-out fund?

When I was in HS, I worked part time for my dad. He paid me a little more than I was worth at the time ($10/hour when other girls my age were making $8 or so), but he didn't give me any money for college. They set up a rule that I was allowed $50/week for fun money, and everything else went into the bank. By the end of the summer I had $6k and paid for my own college. I think it was a good way to do it.

You could probably give your teen more than $50/week in fun money (heck that'll barely pay gas these days), but the idea is the same. Assuming s/he doesn't have any expenses, set aside X for fun, and bank/invest the rest. A Roth IRA started when they're a teen would be a real boon later in life.

[InDebtInDC]

If your child intends to go to college, keep in mind that net assets of the family (parents and child) are taken into consideration when determining the amount of financial aid and invest accordingly.

[disneysteve]

What I hope to do is to have the teen open a Roth IRA and you provide matching funds so that the Roth gets funded but the teen still has his/her earnings available for other needs. I'd love to be able to help my daughter get her retirement money going by providing the funds for the Roth.

[summertime]

Thanks for replying. I was wondering if you might have any suggestions on a good company or how to choose one to open the IRA for her.

[LuxLiving]

I'd suggest saving the entire first month's paychecks to get ahead of the py.to.pychk syndrome. March's income goes to pay April's expenses, April's income to pay May's expenses, etc. This might be hard to do psychologically, but it's easier at this time of their life than it will probably ever be in the future.

Then let the second months' paychecks allow for some small amount of fun, some saving for the LIQUID emergency fund that they'll eventually NEED, the rest to start the Roth. I'd also set up an online savings account for them w/sub-accounts, car + car repair fund, college, house, etc...

What you title the accounts depends on what the goals are.

[jIM_Ohio]

I would look at T Rowe Price- you can open account with $0 if you agree to contribute $50/month until account balance is $5000.

Cheap fees
no load
great web site
great customer service

They have about 120k of my retirement assets (the other 40k are in 401ks with wife and my company).

[FrugalTexan75]

I agree with Jim about TROWE. They do have great customer service, and make it very easy to start investing in a ROTH.

I also agree with living one month behind. If you can teach your teenager the importance of having that "buffer" before he/she is out on their own, it will go a long way in helping them become self-sufficient, financially stable adults.

[jc3900]

As I am a teen, I would say one of the best things you could do for him is exactly what jime said:

1) state the reason for investing
a) retirement
b) college
c) prove it can be done
d) improve net worth

Related to that, I would definately urge you to show him by use of an investment calculator what happens when you invest money into index funds for 40 years. That is what bought me!

[ThriftoRama]

Do you have an IRA or brokerage account anywhere? You can usually avoid fees if all of your household accounts are in one place and total a certain amount (depends on company..) That might be the first place to start.

Also, as others suggested, T Rowe Price has some good programs for beginning investors. I set up an act for my sister there, simply because they waived fees if you consented to a small direct deposit every month.

As for account types, I'd say a Roth IRA and/ or a HIgh-interest savings account. Depends on what the money is for...

But good job. I wish my family had been more money savvy and had helped me with t his when I was a teen!

[summertime]

Thanks very much for all the advice. I will look into T Rowe Price to see what is the best option available.