Jerry Taylor explains why parents should open a custodial IRA for kids as soon as they earn money from babysitting or lawn mowing. An adult manages it until the child reaches 18 or 21, then decades of compound growth can turn modest contributions into several million dollars by retirement.
The earlier you start, the better. And the earliest your child can start is with a custodial IRA. A custodial IRA is a great way to get your child started and knowledgeable about the value of investing. This kind of IRA is for a child who has earned income from any kind of a job. Could be from babysitting or from mowing lawns. A custodial IRA differs from a normal IRA because it is managed by an adult. Could be a parent or some other member of the family. Once this type of account has been opened, it will be managed by an adult until the child is 18, or in some states, 21. Once the child reaches that age, then they will take over the account. This will allow the child to experience the value of compounding interest over many decades. If the money invested is not taken out until after the child reaches the age of 59 and a half, it'll be tax-free. And if you were able to max out that contribution every year until that age, the child would have several million dollars. Check out custodial IRAs. You can do them as
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