Wednesday, October 13, 2010

A Holiday Gift Idea for a Teen – A Lesson in Money

Tired of giving clothes that your teen will just return, a computer game that will keep your teen from going out doors or cold hard cash that your teen will blow before the day is over? How about this year putting that cash to work by giving your teen a gift that will keep on giving? A lesson in money!

By the way, this could be a lesson for you as well as your teen.

The Idea

Open a “Roth IRA” on January 1, 2011 for your teenage child or grandchild and fund it with $1,000.00 (or whatever you can afford, but for this article I am going to stick with $1000.00).

The Price

With the Roth IRA, the invested money must be earned by the owner for that year. So, the “Teen” has until December 31, 2011 to actually earn the $1,000.00 – twelve months.

Here are some examples to help your teen visualize how easy and possible it is to earn $1000.00 in one year:
  • Earn $83.00 a month or
  • Earn $20.00 a week or
  • Earn $2.74 a day or
  • Earn $2.00 per hour working 2 hours a day, 5 days a week
The Prize

$1,000.00 invested one time could have these results for your teen:

Average annual Rate of return -->@ 8%@ 10%@ 12%
50 years$53,878.18$145,369.92$391,583.40
55 years$80,270.18$239,178.43$711,388.26
60 years$119,590.18$393,522.41$1,292,376.71

Note: It doesn’t matter whose money is invested, so long as the owner of the Roth IRA earns at least the invested amount over that year. Therefore, a parent, or grandparent, could do some very creative “Matching” to inspire the child to work more, earn more, and invest more – and retire earlier, with a better quality of life!

The Lesson

Starting your teen investing as soon as possible can have many benefits, such as:
  • Learning the power of compounding interest over time.
  • Growing closer to your teen through the teaching process.
  • Gaining a greater sense of responsibility that comes along with ownership.
  • Learning great habits that can build self confidence and can lead to great success not only in finances, but in life!
Remember, the holidays will be here before you know it, so plan ahead. This year do something that can really make a positive impact on your teen!

I'm so excited to share this information with you. If you have enjoyed the information or feel that it would benefit someone else, please share it. If you have any questions or comments, please feel free to contact me.
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