Build Teen Savings

Physician's Money Digest, December31 2004, Volume 11, Issue 24

If your teenagers work for wages,opening an IRA is a great way to startthem down the road to financial well-being.Although contributions to a traditionalIRA reduce taxable income, that'snot a big incentive, because your teen willrarely owe any income tax. A Roth IRAis a better way to go, because any withdrawalsin the future will be tax-free—and penalty-free, too, if they're not madeuntil age 591/2. Your millionaire-to-becan put all of their earnings or $3000,whichever is less, into a Roth each year. Ifclothes or CDs seem more attractive toyour teenager than an IRA, a parent orgrandparent can put the money in forthem, as long as they don't go over themaximum allowed.