How Teens Can Start Investing Through a Roth IRA
By beginning to invest in a Roth IRA at an early age, today’s teens can become tomorrow’s millionaires.


A Roth IRA can be a great way for a child or grandchild to begin saving for retirement while learning about investing.
A child can utilize a Roth IRA as long as he has some kind of income for the year. If the child isn’t a minor, he can open a Roth IRA at an investment firm. However, if the child is younger than 18, an adult will have to open what is known as a custodial IRA. These accounts are managed by an adult, such as the parents or grandparents, until the child is no longer a minor (typically at age 18). At that time he assumes control of the account.
In the IRA, the child will be able to invest in a variety of stocks, bonds, exchange-traded funds and mutual funds. Target-date funds, for instance, are a good option for investors who are getting started and unsure of what to invest in. Your child or grandchild selects the target-date fund with the date closest to the year he expects to retire, say 2065, and a professional manager does the rest – from choosing investments to gradually shifting to a more conservative portfolio as investors approach retirement.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Make sure you check the investment and account fees, which can erode returns over time. Look at a fund’s expense ratio to find out the percentage of your assets that will go toward management, administrative and other expenses each year. Other fees might also apply.
There are limits on contributions to Roth IRAs. For 2021, the maximum Roth contribution is $6,000 for workers younger than age 50.
A Roth IRA is a particularly powerful tool for young workers. It allows them to turn even small contributions into a sizable tax-free nest egg in retirement. Money goes into the account after taxes have been paid, but thereafter it grows free of taxes. And the Roth offers flexibility: Contributions can be withdrawn at any time without penalty or taxes.
It is smart to have your child or grandchild get an early start on saving and investing. For instance, if he is 18, continues to add $1,000 a year to his Roth and earns a 7% average annual return, he will amass more than $325,000 by age 65. That amount could reach $1 million or more by retirement if he increases his contributions over time.

Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher. She is currently assistant editor, personal finance at The Washington Post.
-
Alaska Airlines to Buy Hawaiian: Get Bonus Miles Now
How to use the Alaska Airlines credit card and frequent flyer program to save on trips to Hawaii, Alaska and beyond.
By Ellen Kennedy Published
-
11 Reasons to Consider a 1031 Exchange
Deferring capital gains taxes might be at the top of the list, but growing your portfolio and your wealth and helping with estate planning are also compelling reasons.
By Daniel Goodwin Published
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
-
Five Ways to a Cheap Last-Minute Vacation
Travel Procrastinator? No matter. You can pull off a fun and memorable getaway on a moment's notice — without breaking the bank.
By Vaishali Varu Published
-
Is a Medicare Advantage Plan Right for You?
Medicare Advantage plans can provide additional benefits beneficiaries can't get through original Medicare for no or a low monthly premium. But there are downsides to this insurance too.
By Jackie Stewart Published
-
How Much Life Insurance Do You Need?
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life-insurance needs.
By Kimberly Lankford Published
-
When Is Amazon Prime Day?
Amazon Prime In 2023 Amazon had two Prime Day events — one in July and another, called Big Deal Days, in October. We expect 2024 to follow the same schedule.
By Bob Niedt Last updated
-
How to Shop for Life Insurance in 3 Easy Steps
insurance Shopping for life insurance? You may be able to estimate how much you need online, but that's just the start of your search.
By Kaitlin Pitsker Published
-
What You Must Know About the Different Parts of Medicare
Medicare Medicare can be complicated but we've got you covered. Here is a quick guide to the different benefits provided through each part.
By Jackie Stewart Last updated
-
5 Ways to Shop for a Low Mortgage Rate
Becoming a Homeowner Rates are high this year, but you can still find an affordable loan.
By Daniel Bortz Published