Investing in Roth IRA For Child

Added February 28, 2009 by Ilyce R. Glink

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Summary: Is an index fund the best way to invest in a Roth IRA for a teenager? Ilyce says index funds are easy investments to maintain within a Roth IRA. But in order for a teenager to have a Roth IRA, he must have a job so he can invest his earnings, because the retirement account takes after-tax dollars.

Q: I'm starting a Roth IRA for my 15 year old son. Do you recommend an index fund?

A: I do believe in index funds, because they are cheap to own and easy to maintain. You really don't have to think too much about them. So, yes, they're a good investment. You might want to open your son's account at Vanguard, which offers some of the least expensive index funds in the industry.

Remember that to open a Roth IRA, you actually have to earn money. So, as long as your son has some kind of job, whether it's bagging groceries at the local store, working in your company or delivery newspapers, and is actually filing a tax return showing income, then he is eligible to open up a Roth IRA, up to the amount of his earnings (you can make the contribution for him, if you like).

Jan. 19, 2009.

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