Dear Carolyn,
I have a sixteen-year-old. What should I be teaching the sixteen-year-old about managing money, retirement, and financial matters? My spouse and I have a difference of opinion on this topic and I want to know your thoughts, Carolyn.
Carolyn Answers….
I favor training teens in financial matters. In only two years, your sixteen- year-old will probably be off to college. So letting this teen start with a simple checking account, small credit card and even a retirement account now can be quite educational.
Retirement account for a sixteen-year-old, you say? Yes, whether you call them Millennial, Gen Y’s, or Echo Boomers, the Internet generation is massive and they all need a kick in the pants on financial issues. No, it is not crazy to talk to teens about retirement and IRAs, even though they are probably more interested in the next video game.
The young need to be educated and get started on their investment careers. Just think about the opportunity to make portfolio mistakes when only $200 is at stake. The new investor can create lifelong habits.
One thing parents, or even grandparents can do with a high schooler is help the high schooler build a model portfolio and watch together what happens to it. Money from chores or summer jobs can be put in the model portfolio or a Roth IRA. The teen would even learn the tax rule about funding the Roth for the prior year before April 15. The Roth would also provide information to the teen about the value of compounding without the yearly tax bite.
Teach these invaluable skills to your teen. Perhaps even subscribe to an investment newsletter for the teen as birthday or Christmas gift.
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This blog is revised from a previous Ask Carolyn in The Rhino Times.
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Note that the answers in “Ask Carolyn” are intended to provide general legal information, and the answers are not specific legal advice for your situation. The column also uses hypothetical questions. A subtle fact in your unique case may determine the legal advice you need in your unique case. Also, please note that you are not creating an attorney-client relationship with Carolyn J. Woodruff by writing or having your question answered by “Ask Carolyn.”