Children nowadays are smarter and bolder to take on more challenging roles at their tender age. Most of these pre-teens and teenagers know a little something about money, which is actually not taught in school. For these kids, taking on a summer job or some work after school is a form of taking charge of their lives while earning a decent income. Of course, it gives them a good subject for their “What I did Last Summer” paper.
Today, the US government provides a different approach to saving for the future of these children. They urge the parents to pursue and persuade their children to allot a certain contribution for Roth IRA. Understanding what this means and becoming aware of its benefits in the future can help you guide your children and advise them to make necessary decisions of their own regarding their lives.
What is Roth IRA?
First of all, you as a parent should know the mechanics of Roth IRA for yourself. An individual retirement arrangement is a program set up by the government to provide people, both young and old, the chance to save up some money towards the time of their retirement. It a form of paying taxes but it is not deducted from you to pay for your use of public transportation and similar utilities. The money that you and your working kids put for the Roth IRA is saved by the government which will be used once you or your kids have reached the legal retirement age.
Saving Up For The Future
So why is it beneficial for your kids to save and spare some of their summer job income or baby sitting money for the Roth IRA? It’s simple. Every year your child will provide a total amount to be given to the government, and each year it adds a certain percentage, say 5 percent. By the time that the amount has reached your kid’s retirement age, he or she will then reap a significant amount of money during his or her childhood.
Think of it this way, your child has some form of government saving bank account or a time deposit to which he or she will not be able to withdraw for something unreasonable like the latest iPhone. You are teaching your kids to take responsibility of their future and take charge of their lives as they reach adulthood. By the time they reach retirement they have a safety net to fall into, whether or not they have been working, doing business or others.
IRA for Kids is Not Taught in School
Although there is great deal of education that children get out of a decent and proper schooling, it is not enough to equip them as they go into the real world. Proper training and education about money and how to properly handle it can be taught to kids even with their young minds. Through the discipline of paying annual Roth IRA fees, you are teaching your children a form of discipline that is not taught in school and will not be learned by your kids unless you take initiative to do so.