Are your children earning any income? Then they can get a head start on a retirement savings account for kids. Here’s how.
Do your kids have a summer job, or are they helping you in the family business? They can get a head start on a retirement savings account if they are making money.
Ready to prepare your child for future wealth-building opportunities? Here’s how to open a retirement account for your child:
Open a Custodial IRA
Kids of any age can contribute to a retirement account like a Roth IRA if a parent or adult opens the account as a custodian. A custodial Individual Retirement Account permits the parent to control the investments in the IRA until the child reaches a certain age (usually 18 or 21), but the assets belong to the child.
You can open a custodial IRA through a brokerage firm or bank. Work with a financial coach or CPA to learn how to research and navigate your options.
“Find out who has the lowest fees and the best reputation,” says Jeff Wilson II, author of The Lies Our Parents Were Sold and Told Us and principal CPA at The W2 Group accounting firm. Also, determine if you will manage your retirement account or have someone else manage it. If you plan to manage it, find a company that actively manages portfolios and has a good brand. Working with a trusted CPA can help you make these important decisions that will provide a foundation for your child’s future wealth-building activities.”
Contribute Money to Your Account
Choose Your Investments
The parent or adult has control over the type of investments that are pursued in the retirement portfolio. You can take the safe route by parking the money in a money market account. Alternatively, you can take advantage of capital appreciation and dividend income by investing the retirement funds in assets such as individual stocks and exchange-traded funds.
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Source: Black Enterprise