Investing for 18 year old
Hi Terry my son is 18 and in college working over summer and breaks. He’s saved about $10,000 and we don’t know what he should do with it. He may need it at some point but just want to earn something. I’ve heard you talk about ibonds and treasury bonds. Would those be a good option?
Thanks
Terry Says
Good for him. And since he is a minor, he should report that income on his own tax return. He may even get a refund if there is withholding on his earnings. But it also may impact his financial aid for school!
In the meantime, I don’t think he should go crazy trying to earn the highest rate. He needs “liquidity” more than return. So leave it in a bank MM account for a while and see what happens.
On the other hand, YOU could do something for him. Open a Roth IRA at Fidelity for him. He can contribute up to $6,000, the max this year (2022) for someone his age.
How about this idea: Ask him to put $3,000 into the Roth IRA (invested in the S&P 500 stock index fund) and you contribute a matching $3,000. Remind him that he can’t (shouldn’t) take this out until he retires — a long, long time from now. If history repeats, that will grow into a nice retirement fund over the next 50 years!
The rest can sit in his MM fund for things he will need in the closer future.