A lot of people regret not investing in their 20s.
But if youstarted investingat 15?
Youd have over $710,000 by age 65.
Obviously, theres no way to turn back the hands of time.
Age doesnt determine eligibility.
Whats not allowed: You make up a job for them and say theyre on the family payroll.
Paying your teen $10 an hour to do clerical work would probably count as reasonable.
But making your 4-year-old a business associate with a $6,000 salary?
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Youll need to open a custodial Roth IRA for a minor child.
Once they reach the age of majority, theyre in control of the money.
Technically, it doesnt matter who contributes to the account.
Youre allowed to fund it, or your child can contribute money theyve earned.
But their contribution is capped at their earned income for the year.
Your kid probably doesnt need a tax break now.
Minors typically fall into a lowtax bracketor their earnings are low enough that they dont pay taxes at all.
By paying any taxes due now, their money will compound for decades.
When they reachretirement age, its theirs completely tax-free.
But for many families, the reduction to financial aid simply isnt worth it.
A529 planis typically a better bet when college savings is the goal.
But if they withdraw that money for any reason, they can significantly reduce their financial aid.
Should You Open a Roth IRA for Your Kid?
Obviously, the answer depends a lot on your kid.
Heres when a childs Roth IRA makes sense and when you should avoid it.
She writes the Dear Penny personal finance advice column.
Send your tricky money questions to[email protected].
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