If you have a child or grandchild who is working this summer, you might be able to help them catch FIRE: Financial Independence Retire Early.
Help them establish a Roth IRA, and if they’re under age 18 or 21 (depending on your state) set-up a custodial account Roth IRA.
They can contribute $6,000 or the total of their earning income whichever is less. For example, if they earn $3,000 that’s their max not $6,000.
The key is to have earned income from an employer.
It doesn’t matter where the money comes from either. Let’s say your grandchild earns $3,000 for the summer. You may want to make an arrangement where you’ll match whatever she saves.
For example, if she makes $3,000 and wants to put $1,500 into a Roth IRA, your match of $1,500 brings her to her $3,000 cap.
The beauty about a Roth IRA is, you and your grandchild put tax-free compounding on their side.
For a great visual explanation of the difference saving early can make, take a look at the chart in this Fidelity piece on turbocharging our child’s retirement.
