06.08.2022

Teaching your kids the value of money

The gift that keeps on giving….

Summer jobs are a rite of passage for our kids and grandkids before they finish their education and graduate from the “Bank of Mom and Dad.”

I don’t know about you, but my adolescent resume was filled with mindless tasks that filled those summer days, with the promise of a paycheck that allowed that first sense of financial independence.

Cleaning up spills in grocery store aisles was among my personal favorites, all for a whopping $2.35 per hour!

Hopefully the young workers in your family are knocking down a bigger paycheck, inflation-adjusted, than I did. And no doubt they are as creative in ways to spend those hard-earned dollars as we were.

But what if you could reinforce and leverage that youthful work ethic by making small gifts when their W-2 shows up?

A custodial Roth IRA can be funded each year up to the amount of earned income that W-2 shows, with a matching gift by you, accomplishing:

  • Money saved to a permanently tax-free environment
  • Taking advantage of investing’s greatest friend – time – with at least 40+ years before any withdrawals
  • Valuable lessons learned about saving, investing, and legacy planning

 

In gaming circles this is called a “trifecta”! And like me many summers ago, your kids or grandkids can be free to spend the money they’ve earned.

There were no Roth IRAs when I was a teenager, but I did try this experiment with my own sons. They enjoyed the fruits of their labors while watching the “gift that keeps on giving” grow into a meaningful amount of money.

Now in their early 30s a decade or so later, each of them has a tax-free next egg that will be impactful to their own retirement many years from now. It’s a great gift to impart to the younger generation, instead of a depreciating object that will eventually become devalued.

The market ebbs and flows, as it’s doing at the present time. Always remember it is the long-term decisions you make that have the most impact. This Roth IRA strategy is one example of that, as is staying the course through difficult markets and not making poor decisions emotionally when the market dips.

 

 

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