Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

How Grandparents Can Make the Most of a Grandchild’s Summer Job

August 06, 2015 at 12:00 AM

So often grandparents come up to me and ask how they can best help their grandchildren get a leg up. My favorite move is to gift a grandchild money to open a Roth IRA. Here’s what you need to know:

• Anyone with earned income is allowed to contribute to an IRA. The only requirement is that your IRA contribution be at least as much as your earnings in a given calendar year. So for example, a grandchild who earns $1,500 at a summer job would be able to contribute $1,500 to an IRA. But we’re agreed that convincing an 18-year old to save for retirement might be a hard sell. So that’s where grandparents come in: you can give them the money to seed a Roth IRA.
• An IRA contribution can come from gifted money. Again, the only rule is that the account holder (your grandchild) has earned income that is at least equal to the amount of the IRA contribution in a given year. The IRS is perfectly okay if you want to gift that amount.
• This is the ultimate compounding gift. A single $1,000 gift invested in a Roth IRA will grow to more than $18,000 in fifty years, assuming a 6% annualized rate of return. Make those gifts for five years and your $5,000 in total contributions will have grown to more than $80,000. Talk about a legacy!

Now if you’re a parent and wondering why I am talking to grandparents only, well, because my sense is that parents probably still have a lot of items to cross off their own Financial To Do list. Such as: Making sure you are on pace with your own retirement savings, paying off credit card debt, and having an eight-month emergency fund all must be polished off before you are to ever consider helping a child with their retirement savings.

Tag Cloud

How To Build CreditVeterinary SchoolStudent Debtteach importance of helping othersbuying a caritemized deductionForeclosurebe true to yourselfLong Term Care premiumsalways use all paid time offreduce monthly paymentloved ones dependent on incomewrite new goalfile taxes quicklyloan no longer than 36monthsdental savings planget the most out of social security Giftpay down car loanFunds30 year mortgage retirment savingsburn outStudent Loandon't buy wantsno fee transfer3 bucket approachderailed planstrained relationshiphealthy teethVital Documentsfocus on needsbuying car 2016file asapfour steps to retirement savings family save at least $100 monthlywomen outlive mendon't extend mortgage juggle multiple financial goalsLTC shoppingMotherInfluentialshealthy gumsSuze is my biggest mentorincentives for health care wellness screeningYoung Adult comparison shoppingheartacheemotional stakesnot enough life insurancefinancial concernlower premiumtaxesraise deductiblesHeartHDHP's are not badMust Have Documentspoint cost offset by savingsescrowcontribute household expenses verify retirement plan with HR or plan sponsornegotiate points with bank or sellerGiftsresponsible with moneythree year car loanno private loanshealthy retirement weightnot gender specific become member only offered while employed 15-year refinance dealsecured cardPersonal Financebuy down higher insurance deductibleGraceDurable Power of Attorney for Health Carelower interest rateMoneyreal estate marketAccuQuote.com401Kkids schedule paymentsSuze Orman Scholarship4 Must Have Documents live below your meanshigh credit score discountEmergency Savingstraditional vs roth 401(k)Bill and Pennynew carsame sex marriage band end Floridavalentines day6 month waiting periodlong-term care eight month living expense student loan repayment estimatoraccelerate dental workEasy Life Insurance mortgage disclosurebig results life insuranceenjoy saving raise your deductibleWall Streetraising interest ratesdon't do five year car loanback-to-school budgethigher monthly paymentETF'srefinancereal estate mistakesFederal Stafford loanlowest cost fund optionsummer job match income retirement accountsdangerous retirement planraise insurance deductibleinterest on student loansconsider roth 401(k)sidelinedhigh down payment10 year repayment plan Mass Mutualis it kind?closing fees3 step financial road mapdon't spend Spendingbudgetbest loan deal president Obamamanage student loansBankFixed Rate Mortgagereferrals required disclosurestore credit cardsplanSuze Orman spouse Kathy Travis19 years cash flow problemcredit unionfinancial goal phraseanticipated salarycredit reportstandard ratedeath benefit 20 to 25 times annual incomestudent loan repaymentloan necessitymax employee matchSelfishleave a legacyprescription tierFinancial Power of Attorneyhome buying seasonengaged in financesFinancial Advicemental healthmoney-aware childoverspend on dining outcredit utilization ratemaintain standard of livingpercentage of women widowed 75-84college studentPhyllis Shelton expert long-term carepeace of mindRoth 401(k)employer offered life insurancesocial security not going brokeCOLAwaive home inspection bidHDHP push yourself to save more for retirementprotect dependent increased auto insurance premiumgraduationcar loan8 Ruleshealthy youopen enrollment review doctors in networkMarlo Thomasmobile apppublic service loan forgiveness programemergency fund repay student loanslower rateexercise reguarlygay marriage ban end Florida universal college accesscostly insurance mistakehealthy retirement blood pressurehome buying budgetpreexisting condition not coveredfinancial argumentsFinancial Awarenessunder 18 financial giftPrime Rate Rise 2015back door Roth IRAclosing costs 2% of loantax ID theftJose Rodriguezpositivebest interest ratesemergency fund savingsSandy Hook Promisemarriage financial responsibilityhealthy aging community bankHigh Credit Scoreverify wellness screening and programsdon't ignore open enrollmentcan you afford itearn more on savingscharges on credit cardonly refinance if it paysshop online guaranteed level term policyAmy Lacyetprofessional advisorunsubsidized Stafford loankeep a schedulecommunity college10% donate to charity!00% tuition paidavoid burn outsavings pleasurefocus on new truth FRApublic service career student loan repayment letter to suzeage appropriate choreknow before you oweCommunication Skills LTCi ASAPsave school The Suze Orman Showemployer funding HSAhome buying mistakescontribution protect loved ones SelectQuote.comwould you decline a bonusterm insurancedon't charge a pennyInterestdon't defer interest paymentsno private loaninsurancemonthly dental insurance premiumannual cost of living adjustmentUniversity of Floridadebt freesuitableStock Investmentsteensretirement planMost Influential Celebrities Listcommitdepreciating asset cut monthly cable billConventional loan PMICredit Card Rate IncreaseAARPGoodbyeadjust allocations powerfullong-term care premiumswomen longer life spanphysical healthreduce interest rateFHA loan feesproperty taxspring summer small changes successage appropriate goalsCPI-Wfinancial independence2017 Taxesdeath benefit needs for familyUniversity of IllinoisDeath Benefitsocial workAuto Savings 20% equitymortgage brokerinterest capitalizationpay 100% cashlet them have 50% controllow down paymentlow credit scoreschedule vacation40% toward financial goalallowancereplace permanent life insurance with termWashingtonCommencementno tax on withdrawlsstay positiveFICO at least 720Adequate Auto and Home Insuranceis it necessarypay credit debt ASAPbest interest of investor15 year mortgagesetup automatic savings withdrawPBS SpecialLovePrime Rate Increase50 over 50quick closingEric Dodge cut monthly cellular billmake saving a pleasureFiscal ResponsibilityInflation Benefithome insurancepremiumretirementnear historic lowscalculate dependents annual income needsno negativityaffordabilityPost-DivorceARMinitial tax break paying for collegeHolidaydon't derail retirement savingsincrease retirement savingsadvice for college graduatesFinancialNew York LifeMoney Marketwives should be involved in retirementlow mileage discountCD'sSatisfyingfinancial fearsFinancial Awareness Video Festivalno life insurance financially irresponsibleroth iraFederal Funds Ratespeak new goalFree Debt Eliminatormeet monthly Save Us Moneycredit cardterm life insurancedebit cardStaffords this year have a fixed 6.8% interest rateHoliday Shoppingdental discount plansocial security never insolvent20 year level term mortgageyours, mine & oursgrandparent IRA contribution Holiday Seasonbuy homesame-sex marriageclosing disclosuremultiple lendersautomatic withdraw to savings Alarm ClockFederal Reservegift up to 14,000switch to spouse coveragecollege graduatedream schooldear suzecnbc alarm clockbe good examplepurely financial standpointCollege of Veterinary Medicinegrandchild summer job IRA contributionno retirement funds for down paymentstandard deduction balance transfer Financial CliffInfluential Celebrity8 month safety netritual scheduleprovider of financial supportno interestdoctor no longer in networkmoney vowsstretch out haircut appointmentsRevocable TrustSandy Hook Elementary Schoolcompare provider pricingdo not pay allowance for good behaviorTeachkid borrow firstworkaholicallowance taskchildren's bookHigh FICO Score = Better Ratefull retirement ageaffordable premiumRetirement Incomebetter termsone annual feeInvest for savings growthcommissionsone credit card2015 record year car salesFinancial Educatordental insurance pay down student loan debtreduce withholdingworst financial mistakepay interest while in schoolUS Tax CodeNew american Dream Lifestylehigh FICO scorefederal student loan deferment dangerous money seasonmonthly benefit Long Term Care Insurance 20% down paymentCredit Card Interest Ratemax benefit coveredcostly legal title insuranceswitch to roth 401(k)gift grandchild IRA contributionBaby Boomersmax employer matched 401(k) contributionlife insurance name trust as beneficiaryAARP Social security calculatorTelepicturesForbes Top 10too expensive school401(k) Contributionscar buying mistakestelevision host8 month emergency fundinsurance mistakestudent loan repayment planidentity theftpay off debtultimate compounding giftface your financial fearUrbana-Champaign3% debt transferred pay high rate off firstprotect and provide for minor child financial aidFICO credit score credit card mortgagestaycation740 credit scorebill paying prioritiessecure creditAmericans don't use all paid vacation timeEmployer Matched ContributiondebtChanging Livesprotect your familyraising mortgage rates confident of solutionSuze approvedFinal Goodbyepaid vacationlong term carefiduciaryapproved medical 100% tax-freeRichForbesteach your child good money habitszero rate transfer dealsExhibitionrising home pricesOne Wallet At A Timeoverspend on giftsrolloverhome related tax break bonus unexpected expenseovercome financial fearshousing marketborrowing plan better loan dealswomen live longerRetirement Savingslousy investmentHDHP'sHDHP/HSAhigh deductible health care planbad decisionsLTCbetter loan ratesincrease retirement contribution rateinsurance yearly reviewdon't blow tax refundrequire chore in exchange for allowanceCivil RightsFICO ScoreconfidentFinancial Solutions For Youloan big picture borrow each year, capitalization is going to pile up Federal PLUS loanhome loan credit score below 740 adult childrenautomate student loan paymentsmortgage interest tax deductionCombo Insurance ProductsCNBC2016 adjust estimated taxCredit scorepercentage men widowed 75-84take actionfraudulent returnsocial securityget health insuranceno apologyMoney-Savingincrease emergency savingsearn allowancecar leasingdon't use allowance as bribeignore 6 month grace period no waiting periodhigh premiumsSwap Older Annuities or Life Insurance holiday spendingis it true? credit managementno late fee save moneyget credit cardLegal Guardianlearn good financial choiceshighest possible benefitat worst still pay 75% benefitadd teenrefundlower overall drug costbad retirement planningCiti Simplicity Card Newtownhome budget after tax costnon conventional routehome ownershipalternative FICO scoreGay CouplesWillcouple financesidentity fraudpay more than minimumbreakdown projected monthly housing costFinancial Systemfinancing car marriage inequalityAshley Springerco-sign long term goal3 savings buckets Cory Bookerget over life insurance phobiastudentdon't cover cosmetic dentistrywomen long term carecreate new truthresponsibleretain separate credit cardsjanuary bills2015 financial roadmapHDHP's are good for youSchool of Social WorkStudent Debt Crisisstudent loan debtMinor Children automatic paymentPay Off Debt Before Retirementoverspend on nights outRevocable Living Trustlower mortgage interestbe kind to yourselfno sneaking in feesIRA contribution gifted moneyGay Rightsorigination feestax refund fraudeliminate credit card debtchildren under 182016 adjust withholdingcompare monthly expensesSuze Ormanpaid in fullshorter payback periodvalue moneyLong Term Care shoppinglow-cost index mutual fund20% down payment avoid feesHSA tax savings20 to 25 times annual incomeno splurge buy home you can affordteens and moneycost of capitalization calculatorARM Cautiondo you need life insuranceOverspendingBeautyFinancial Gift CliffSuze Orman's Money Warsloan is giftiffy incomepermanent life insurancerent vs buyMortgage Credit Availability Indexshort term goal Suze changed my lifeBankruptcyspecial saving accountWarner Bros Television Groupgift not loanis it necessary?savings


View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel