For those with teens: what accounts/funds do they have?

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For those with teens: what accounts/funds do they have?

Post by JV »

My son will soon turn 18, works part-time, and will continue working in college. He has ~ $5k in a checking account, and he and I have been discussing investing and different types of accounts to use. I was considering helping him start a Roth at 18 and matching some of his contributions (which I previously had a thread on). He may still have some money left over each year, so I'd like to set up a taxable account for him. Considering he is so young and has no idea what the money may be for, and since he's in a very low tax bracket (0% right now, perhaps next year he may hit 12%), would you recommend a short-term bond fund or something like the LS Income fund for him to throw his extra money into? Again, his time horizon for a taxable account is unknown, as who knows what will come up, but I'd like to get him a bit more return than a basic checking account.

Thoughts? For those with teens who work, what accounts do you use?
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Re: For those with teens: what accounts/funds do they have?

Post by gwe67 »

Close joint bank accounts and create new ones in the name of the 18-year-old.

Change title on car to the name of the 18-year-old.

Have 18-year-old get own auto insurance.

Add 18-year-old as authorized user on credit card but do not give 18-year-old the card or number.
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Re: For those with teens: what accounts/funds do they have?

Post by JayDee37 »

My daughter will be 17 next month, and she still has a year left in HS. She has both checking and savings accounts, and puts 15-20% of everything she receives into savings (thus far it's been babysitting money, birthday gifts, etc.) She is planning to get a part time job once school starts, (can't this summer as she is participating in an educational exchange program overseas) and to continue working during college. I have told her that I will match any Roth contributions she makes once she is eligible to start one. For the rest, I am inclined to just let it ride in savings, as she definitely has A LOT of plans for what she would like to do with any excess, mostly involving travel while she's young and "fancy-free." She will also have to cover her day-to-day expenses in college (her dad and I will cover tuition, books, room and board, but everything else will be up to her). Her dad and I will also cover her car expenses (other than gas) during her senior year, but after that if she wants to have a car at college it will be up to her. So I'm not anticipating a ton of unallocated dollars languishing in her savings account. Of course we will revisit her finances as necessary throughout the next several years until she's fully fledged.
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Re: For those with teens: what accounts/funds do they have?

Post by MattB »

JV wrote: Wed Jul 21, 2021 11:54 am Thoughts? For those with teens who work, what accounts do you use?
I don't have a teen (yet) but have a few ideas.

Yes on a Roth IRA. This is without question the best investment account for an individual in a low tax bracket with a long investment horizon. You son will thank you in the future for setting this up and teaching him to max or attempt to max it every year.

You might also suggest that your son split extra earnings between his checking account and a taxable brokerage account, maybe 90% to his checking account and the remaining 10% to a brokerage account. The difference between what he will earn in a checking account and what he might earn in any other relatively safe investment vehicle right now is essentially nothing. And doing this might build the habit of saving and investing a fixed percentage of his income while budgeting the rest for needs and wants.
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Re: For those with teens: what accounts/funds do they have?

Post by jayars35 »

My two kids started working in our business when they were 12 and 14. Both have been salaried employees since they started. They both have custodial savings accounts at our credit union. The older is now 17 and we recently added a custodial checking account for her at our credit union. Both also have custodial ROTH IRA's (Schwab Target 2055 Index Fund), that were started when they were 13 and 15.
Last edited by jayars35 on Thu Jul 22, 2021 12:20 am, edited 1 time in total.
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Re: For those with teens: what accounts/funds do they have?

Post by cchrissyy »

my teens have custodial brokerage accounts for their holiday gift money and potentially their own future contributions. they have just one holding, a total market index fund. each kid also has a checking and savings account at the local credit union and manages their own banking.

in addition, as they became old enough to have a real job i let them save/spend their paycheck while i open a custodial roth ira and fund it for them at year end in whatever amount their w2 says is allowed. again, it's a total market index fund. i think it's important a couple times a year to show them about investing and answer questions.

i don't think bond funds are appropriate for such young people. you have a valuable opportunity for compounding and no immediate needs or responsibilities for the funds. give them their best chance to grow.
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Re: For those with teens: what accounts/funds do they have?

Post by SnowBog »

Have a pre-teen, but they have:
  • Child savings account (from Capitol One) in their own name (taxes reported to their SSN)
  • UTMA setup to partially fund education using appreciated shares (and dealing with "kiddie tax")
  • 529
When they start working, I'll definitely be setting up a Roth. My intent is to get them to learn to save at least 20% of earnings, and if needed we'll "match" their Roth contributions to instill this habit (and help put as much into Roth as possible in early years).

I'm currently on the fence on a taxable account... But at some point (when they start making more then Roth limit, and have adequate savings) I'll have to cross that bridge...

Regarding bonds, I don't expect to directly buy (or encourage child to do so) in their account. Instead, I plan on encouraging them to start building their "emergency fund" (in savings account) - which in the early years is likely more "fixed income" than they would otherwise need.

For investments, as they have decades, it will be 100% equity (or possibly a single target date fund, which will automatically shift to bonds as the get older).
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Re: For those with teens: what accounts/funds do they have?

Post by Bama12 »

100% in VTI for my 17 year old.

Once he can open a Roth it will be Small Cap Value and RETI.
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Re: For those with teens: what accounts/funds do they have?

Post by livelovelaugh00 »

My daughter has a custodial Roth account that I set it up with her earned money. She saved them all in a checking account. I matched all in her Roth when she was in high-school. They are in AMZN, QQQ and VOO. Now she's in college. She opened a separate Roth with income from her TA, RA and summer internships. She put the allowance we gave her in brokerage account as investment and checking account as emergency fund.
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