Parents are always looking for ways to help their children prepare for their future, and what better way to do that than to encourage them to invest their own money in a high-interest retirement account early on? A self-directed IRA is a great way to earn more interest on a retirement account, but can kids take advantage of these accounts too? Yes and no. The answer isn’t as simple as I’d like, but under the right circumstances, some children can take advantage of an ARDS, find out how your child can do it.
If you want your child to be able to invest in an IRA, you need to make sure they work at some point during the year. It is very important to realize this idea, because without some income of your own it is not possible to invest in a self-directed IRA. As soon as your child gets a summer job, or some time after school, he can start saving money for retirement or you can do it for him.
Although having a job is enough for your child to be able to invest in an SDIRA, it does not mean that they will be able to make the maximum contribution of $5,500 each year they work. That number is only valid when you earn at least $5,500 during the year. If your child only earns $1,500 from their summer job, that’s the maximum amount that can be contributed to the IRA.
It’s amazing how much money a simple SDIRA account can generate for your child over their lifetime, as long as you leave it in place. Just a few thousand dollars can add up to millions of dollars over time, as long as they are invested carefully. Make sure your son takes advantage of the options available to her. Most kids don’t even consider investing in retirement early on, but that’s when the investment pays off the most.
Just make sure your child is taking on an investment that has a good chance of paying off over time. Children like to invest in something that interests them, but an interesting investment is not always a good one. Encourage your child to try, choose her own investment, but also guide her towards something that has some value. If you are unsure about an investment that interests you, it may be worth seeking the help of an expert.
Cars or new gadgets are an attractive way to spend summer earnings, but careful investment in a self-directed IRA could make all the difference when your child finally decides to retire. Believe me, he will thank you later in life for pushing him to invest in her future.