According to CNBC, the best option for children or grandchildren who have earned income may be to open a custodial Roth individual retirement account for them. It can be any type of earnings, for example, a summer job, part-time job or perhaps even the money from household chores. It doesn’t matter how the money is earned or whether it’s deposited as a paycheck or cash, as long as it’s been documented it’s eligible.
Whatever the type of account you choose to open, it’s important to remember the old adage of the financial advice sector: the earlier contributions are made, the greater the compound gains. This means that if the child can max out the account from the earliest possible stage (maximum total contributions in 2019 will be $6,000), there is huge potential for them to enjoy financial security later in life. For a parent there can be few things that bring greater peace of mind than knowing your offspring will be provided for even after we are gone.
This is not to say that the money would necessarily have to be spent on your child’s retirement. As custodian you will oversee the account until the child reaches a certain age, typically 18, and at this point the child will be able to use the funds for education, buying a home, investing, a business start-up or even, once the day comes, the financial future of their own children.
What is certain though is that prudence breeds prudence. This is true even at the level of your retirement planning; the more steps you take to plan for your retirement, the greater the likelihood that your child will follow suit.
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This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.