A Penny Saved Is A Penny With A Plan

A Roth IRA is a retirement account that offers tax-free growth on investment earnings. If you have earned income can open a Roth IRA, including minors. Here are some of the benefits of using a minor Roth for saving:

• Tax-free growth. Earnings in a Roth IRA grow tax-free, which can help your child's money grow faster.

• Estate planning benefits. A Roth IRA can be passed on to your child's heirs without incurring any taxes.

• Flexibility. Roth IRAs can be used for retirement, but they can also be used for other qualified expenses, such as a first-time home purchase or qualified education expenses.

• Patience. In a world increasingly fueled by instant gratification, saving this way encourages impulse control. This is especially true when automatic features are set to move funds from your paycheck to your savings account.

If you're considering using a minor Roth for saving, here are a few things to keep in mind:

• Your child must have earned income. In order to contribute to a Roth IRA, your child must have earned income. This can come from a part-time job, babysitting, or other sources.

• Contribution limits apply. The contribution limit for a Roth IRA is $6,500 for 2023. This limit applies to all of your Roth IRAs, not just the one you open for your child.

• Early withdrawals may be subject to taxes and penalties. If your child withdraws money from a Roth IRA before age 59½, they may have to pay taxes and penalties.

Overall, a minor Roth can be a great way to save for your child's future. By starting early and taking advantage of the tax benefits, you can help your child build a strong financial foundation.

The Take Away:

• Start early. The earlier you start saving, the more time your money has to grow.

• Contribute regularly. Even small contributions can add up over time.

• Invest wisely. Choose investments that are appropriate for your child's age and risk tolerance.

• Rebalance your portfolio periodically. As your child gets older, you may need to adjust your investment mix to reflect their changing needs.

• Consider a financial advisor. A financial advisor can help you develop a saving plan and make sure your child's money is invested wisely.