Earning Their First Roth IRA Contributions—Emma & Payton

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Kid$Vest Grandkids

Kid$Vest’s two core principles are to have kids become financially educated, and then take action steps to reach their financial goals. Of course, the ultimate action step is setting up and contributing to a Roth IRA in their teens.
Remember, if you work part or full-time, you can set up a Roth IRA in the amount of the dollars you earn--up to a $5,500 maximum. This money can be invested in mutual funds, ETFs or individual stocks and compounds until it is drawn out in retirement. You contribute with after- tax dollars, so that amount drawn out is tax free.
And If the HeadKid at Kid$Vest can’t help his grandkids accomplish these goals, how can I expect any other parents, teacher or communities to follow its principles? So, the very first day of summer vacation, Emma and Payton (13 and 10, respectively) weren’t sleeping in late or relaxing on the couch. No, they were in Ampa’s yard spreading mulch in the garden beds.
There are so many things I love about this picture--I just had to share. They include:

  • Any day I spend with my grandkids is a great day for me. We worked hard, laughed and talked, and filled my garden with mulch—a job well done.
  • Having my grandkids or any youth learn the value of hard work sets them on a road to a life full of accomplishment—what a concept?
  • During our lemonade breaks we discussed numerous topics, but also chatted about putting their wages directly into their newly initiated Roth IRA. Parts of our conversation revolved around what a Roth IRA was and why little amounts of money contributed could become large sums over 40-45 years of compounding.
  • For example, the $250 each of them earned could turn into $10,000 dollars by the time they retire. And if they helped me each of the next four summers the total $1,000 saved could be worth $50,000-$80,000 at retirement. Now we are talking!

  • Since I gave them a small tip for their efforts, and their wages contributed to their Roth IRA, both kids learned about instant and delayed gratification. That is, spend some of your money now, but make sure you are saving some of your cash for the future.
  • During our work both kids suggested that they would help me with this project for free, which means they have learned about helping family and giving back. These are some great personal characteristics that were likely learned at home. I declined, but their offer still made me feel good.
  • Finally, Ampa got a great looking yard and saved over $200 from the bid a local company offered him to deliver and spread the mulch. Of course, every time I look at the yard this summer I will think of Emma and Payton and the positive steps they were taking toward a more financially secure and happier life. That’s worth more than the money I saved!

As we all know, these are baby steps (or in this case, kid steps) toward a life-time of financial leaning and action steps that might financially protect them long after I’m gone. How better can a parent or grandparent help their kids succeed. I could afford to pay them a bit higher wage for their efforts, but the dollar amount is unimportant at this stage.
It is the concept of “paying yourself first” and learning how to begin the process of budgeting, saving and investing. They will have many more years to help themselves, but getting started is often the hardest part. So parents, help your kids any way you can, regardless of the dollar amount you can afford for extra work performed. And kids, don’t wait for others to help you do the right thing for your financial life--just jump right in as soon as you are able. And remember, the benefits to both parent and child are much greater that merely paying for the work completed.
Be sure to send your pictures and tell us your Roth IRA or other Kid$Vest story. If you win “Story of The Month,” we will send you a free copy of The Kid$Vest Project.
Take care and Have a Kid$Vest Day!
Greg A. Fouks, HeadKid