His grandfather and I have prepaid his college tuition, so he will have no big expenses there.
I would like for him to invest in a Roth IRA.
In doing so, he would not be tempted to withdraw the money.
If you have more than $1,000 in your checking account,make these moves.
He will be 18 in June if that is a requirement.
Is this a smart thing to do?
-J.
Dear J.,
In theory, this is a great idea.
Since your grandson is 17, Im guessing he doesnt have a big tax bill.
Thats a big ask for a 17-year-old.
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Age isnt a factor.
The classic example here is that even the Gerber Baby could open a Roth IRA.
In 2023, the limit increases to $6,500.
Because your grandson is a minor, hed need acustodial Roth IRA.
Hed own the money, but an adult would need to make the investment decisions.
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Hed be able to withdraw the contributions (but not the earnings) at any time.
But taxes and penalties may not be a huge deterrent when it feels like retirement is a lifetime away.
A good place to start is by talking about short-, medium-, and long-term financial goals.
Buying a car or saving up spending money for college are examples of short-term goals.
A medium-term goal might be to buy a house after college or pay for graduate school.
Did you know?
Even if he only invested $100 a month for the next year, the payoff could be substantial.
Ultimately, though, this is your grandsons money, so its his call.
Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder.
Send your tricky money questions to[email protected].
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