Kids turning 18.....Roth IRA...life insurance...

**Fishindude77** · 02-20-2021, 05:32 AM

I see no reason for an 18 year old with very few assets and no dependents to spend money on a life insurance policy.

**disneysteve** · 02-20-2021, 05:36 AM

Welcome!

Yes, she can open a Roth. If you're doing it before April 15, it can be for 2020 and she can contribute $6,000 or what she earned, whichever is less. If she earned $6,300, then she can put in the full $6,000. If you're doing it after April 15, it needs to be based on her 2021 earnings.

When does she turn 18?

It doesn't matter where that money comes from. If she wants to sell her stocks and cash in her bonds and use those proceeds, that's fine. If you want to help her and give her funds toward the Roth, that's fine too. If she wants to use some of the money she is currently earning, that works. It's all good.

Why does she need life insurance? Is anyone financially dependent on her? That's the purpose of life insurance: if she were to die, to help support those who would suffer financially from losing her. Student loan debt is irrelevant UNLESS you will be consigning those loans and want to have the insurance to pay them off if something happens to her. Otherwise, if they will be in her name, you aren't responsible for loans after her death. Maybe if you want a small policy, like 10K, for burial costs if something happened, but aside from that, no, an 18 yo doesn't need life insurance.

**Jaxxy0408** · 02-20-2021, 05:47 AM

Good morning,

Thank you for reply
I hope to open in March when she is officially 18.

So I think we will cash out stocks and bonds (max out 2020).

Life insurance thought is we will be cosigning and by year 6 she will be close to 200k in debt.

**disneysteve** · 02-20-2021, 05:59 AM

Originally posted by Jaxxy0408 View Post

Life insurance thought is we will be cosigning and by year 6 she will be close to 200k in debt.

Ouch. Are you prepared to pay off those loans if she doesn't? I sure hope you've got a giant emergency fund in case that goes south.

**myrdale** · 02-22-2021, 06:45 AM

Jim,

First and foremost, welcome to Saving Advice! This place is a treasure trove of knowledge on wealth. You may get a wide variety of responses / opinions, but the average consensus is usually pretty close to the mark in my opinion.

Here's my thoughts, and you may have some of these covered:

1) Have her open a bank account in her name (I assume she has this).

2) Start the Roth IRA.

If she can max it out, GREAT!! This money has a LONG time to grow. But between school and life at 18, I don't think she needs to be saving more than 25-50%, $1,000 is better than nothing, but $6,000 is going to be hard).

3) Get an credit card.

This has to be a very controlled sort of thing. Maybe get one though her bank. Personally I have an in store card with The Home Depot and a second one with Lowes. I might spend $100 ever other month at either of these stores and it is paid in full every month. The point it to start building a payment history on something she isn't going to max out and can pay in full every month.

4) Life Insurance?

I do not recommend this at this point.

If the loans are in her name, and God forbid, she dies, the loans die with her.

If in 8 years she is married, and they have a house jointly in the name with her husband, (even more so if they have children), then I would consider life insurance.

Personally I signed up for a 30 year term policy when I purchased my house. After the house was paid off, I decided to keep the policy as it isn't that expensive and it'll leave my family (mother and sister) some cash in the event of my demise.

On the other hand, my sister has life insurance policies on my niece and nephew (6 & 10). Personally I think this is insane.

5) The stock market accounts?

I am not sure I am on board with this. One of my drinking buddies talks about his Apple stock and Dollar General stock from time to time and how well they are doing. A coworker goes on and on about his Tesla stock he sold and how he should have held on longer.

In my opinion, unless she is going to study the stock market, it's all a gamble when it comes to buying individual stocks. But for just the learning experience, maybe it was a good choice.

6) Books

I am working on "Rich Dad Poor Dad" right now. "Thou Shall Prosper" is good. "Total Money Makeover" is good. Anything by Dale Carnegie is worth reading, "How to Win Friends and Influence People" and "Stop Worrying and Start Living". While not finance exactly they will still help in general.

7) TV / Podcast / Radio

I am a big Dave Ramsey fan. I don't agree with 100% of what he says (for example he would NEVER suggest getting a credit card as I did). Watching Dave is like watching Judge Judy, there are really only about 5 episodes and you know almost immediately what when wrong and how to fix it, but hearing so many people's problems from so many angles will give you some insight on how they got into the mess and how you can avoid their mistakes.

8) The Internets

This website being #1.

**disneysteve** · 02-22-2021, 04:28 PM

Originally posted by myrdale View Post

If the loans are in her name, and God forbid, she dies, the loans die with her.

Not if OP cosigns those loans.

**Jaxxy0408** · 02-23-2021, 01:25 PM

Thank you all for the replies. Lots of great information. She will max out IRA.
And Disneysteve is correct my guess is we will be cosigning for loans, Pharmacy school runs close to 30k a year

**Captain Save** · 02-25-2021, 06:20 AM

Originally posted by Jaxxy0408 View Post

Good morning,

Thank you for reply
I hope to open in March when she is officially 18.

So I think we will cash out stocks and bonds (max out 2020).

Life insurance thought is we will be cosigning and by year 6 she will be close to 200k in debt.

I disagree with most here when it comes to life insurance.. I don't think you HAVE to get it.. but the question of whether or not she needs life insurance is your decision .. because if she dies tomorrow.. who's responsible for her final expenses... the likeliness of her passing away at a young age is rare.. but if that were to happen.. would you be able to comfortably pay 20k or so for her final expenses... if so then it's probably not a big deal to pass on it.. but if you're not sure .. keep in mine you can take care of that for abotu $100/year .. less than a Netflix subscription... until she earns a living ..then she can pay for it herself

**disneysteve** · 02-25-2021, 06:25 AM

Originally posted by Captain Save View Post

I disagree with most here when it comes to life insurance.. I don't think you HAVE to get it.. but the question of whether or not she needs life insurance is your decision .. because if she dies tomorrow.. who's responsible for her final expenses

The life insurance in this case is because OP will be cosigning on 200K of student loan debt. In that setting, life insurance is a must.

**Captain Save** · 02-25-2021, 06:29 AM

Originally posted by disneysteve View Post

The life insurance in this case is because OP will be cosigning on 200K of student loan debt. In that setting, life insurance is a must.

i agree but even without that.. i wouldn't say " she shouldn't have it" .. he has to assess whether or not he's in a position to shell out 20k if her kid passes away... only a question he can answer especially since we don't know his situation

Kids turning 18.....Roth IRA...life insurance...