Can you give retirement?

Yes! In the form of the parent or grandparent “401(k).”

One of the most overlooked financial opportunity is starting a Roth IRA.  The second a child or young adult earns any income it can be contributed into a Roth IRA and compound tax free. Babysitting money,  mowing lawns, raking leaves all qualify as earned income. Parents and grandparents commit to match the contributions just like a real work environment. The earlier you teach the child to have earned income the faster the compounding starts.  My wife and I have done this for our kids. Our boys are now 27 and 29 and have over $60,000.00 in Roth IRA accounts. Both kids will become financially independent and set for retirement because we started early and transferred a financial habit that works best the earlier you start.

*** Save 20% on Munny Journey ***

Save a dollar a day for financial freedom

Here are the steps to giving retirement using compound interest.

Step 1: At birth, open a low cost equity mutual fund (Monetta Young Investors Fund), fund it with $100 and then make automatic payments of $30 a month (save a dollar a day).

Step 2: For birthdays and holidays add to the account. Include a note that explains that you are investing in their future.

Step 3: When the child is old enough to work (be creative) start the parent/grandparent (401k). Match whatever amount the child saves. Educate your grandchild that this is a longterm account and should not be touched. This step starts a success habit for the child that will change it’s life.

Step 4: Mentor the child through the temptations of immediate gratification.  Use positive guilt if necessary.

This four step process has the potential to reduce/eliminate student loans or build a retirement nest egg that will create financial security.

 

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