Today we'll cover Part 7 (the last part) of a piece from Money titled "How to Make Sure Your Kids Will Live Better than You", an article that offers several ways to make this wish a reality. Today we'll cover Money's advice on helping to make your child a millionaire:
Parents of teens with afterschool and summer jobs can give their kids a huge leg up by helping them to invest some of their earnings in a Roth IRA.
Although it may seem ludicrously premature to think about retirement savings for a teen, the power of compounding over a half century or so makes the payoff huge: A young worker who contributes $4,000 a year from ages 14 to 18 and lets it ride at 8 percent for the next 50 years will amass a nest egg of more than $1.1 million, even if she never saves another dime.
Of course, you may discourage your child from ever working again if you insist that she lock away all her earnings for decades. A more practical approach, if you can afford it: Ask your child to put some of her money into the Roth, and fund the rest yourself, up to the total your child earned or the current maximum of $4,000, whichever is less.
Great idea! I'm going to do this when our kids get old enough to earn a substantial income. I'll likely match them dollar for dollar to give them an incentive to save.
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