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College Saving vs Roth IRA for a Teen

whlinderwhlinder Member Posts: 4,749 Standard Supporter
edited May 2022 in Tug Tavern
Figure I'll toss a personal finance question out there.

The kid got a job finally with taxable income this summer. Babysitting still happens for straight cash homie, but she's earning real, taxable income now. Not much, like I don't think she'll have more than $2K to report in earnings, but it is greater than zero. Progress.

The standard view would be "save some of it for college!" Which she'll be at in 2 years. But I look at that 10% tax rate, the ability to grow that 2K tax free for the next 45 years, the ability to pull the principle out, the ability to pull some out for first house purchase, and I'm like shizz put that in a Roth IRA. Would even put some of my own money in there to give that early life nest egg for her.

Curious if anyone has ever done that calculation/evaluation for their kid?
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  • DerekJohnsonDerekJohnson Administrator, Swaye's Wigwam Posts: 63,254 Founders Club
    edited August 2021
    @UW_Doog_Bot will have a good answer I'll bet
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  • godawgstgodawgst Member, Swaye's Wigwam Posts: 2,487 Founders Club
    whlinder said:

    Figure I'll toss a personal finance question out there.

    The kid got a job finally with taxable income this summer. Babysitting still happens for straight cash homie, but she's earning real, taxable income now. Not much, like I don't think she'll have more than $2K to report in earnings, but it is greater than zero. Progress.

    The standard view would be "save some of it for college!" Which she'll be at in 2 years. But I look at that 10% tax rate, the ability to grow that 2K tax free for the next 45 years, the ability to pull the principle out, the ability to pull some out for first house purchase, and I'm like shizz put that in a Roth IRA. Would even put some of my own money in there to give that early life nest egg for her.

    Curious if anyone has ever done that calculation/evaluation for their kid?

    Roth all day long/2ce on Sunday. You hit nail on head, with chance to grow it tax free. 8% return in S and P 500 w/ reinvested dividends in 45 years will be worth $64k. It's worth almost 80k if she leaves it in there until she hits 68 which by then may still be to young to start and collect social security if it's even around by then.



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  • BleachedAnusDawgBleachedAnusDawg Member Posts: 11,456
    PostGameOrangeSlices said:

    Totally disagree

    She will need the money for college. Music festivals with friends, other experiences, clothes, food, and millions of other things

    She will have the rest of her fucking life to contribute to 401k plans after graduating

    Let her live a little, she will only be college age once

    It's only $2k, though.
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  • PostGameOrangeSlicesPostGameOrangeSlices Member, Swaye's Wigwam Posts: 25,983 Swaye's Wigwam
    BleachedAnusDawg said:

    PostGameOrangeSlices said:

    Totally disagree

    She will need the money for college. Music festivals with friends, other experiences, clothes, food, and millions of other things

    She will have the rest of her fucking life to contribute to 401k plans after graduating

    Let her live a little, she will only be college age once

    It's only $2k, though.
    Which goes a long way in college for the things I listed

    Afterwards? Not so much
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  • BleachedAnusDawgBleachedAnusDawg Member Posts: 11,456
    PostGameOrangeSlices said:

    BleachedAnusDawg said:

    PostGameOrangeSlices said:

    Totally disagree

    She will need the money for college. Music festivals with friends, other experiences, clothes, food, and millions of other things

    She will have the rest of her fucking life to contribute to 401k plans after graduating

    Let her live a little, she will only be college age once

    It's only $2k, though.
    Which goes a long way in college for the things I listed

    Afterwards? Not so much
    I'm pretty sure I would've blown through $2k in a month if I had extra cash sitting around as an 18 year old college student.
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  • dirtysouwfdawgdirtysouwfdawg Member, Swaye's Wigwam Posts: 12,980 Swaye's Wigwam
    DerekJohnson said:

    BleachedAnusDawg said:

    PostGameOrangeSlices said:

    BleachedAnusDawg said:

    PostGameOrangeSlices said:

    Totally disagree

    She will need the money for college. Music festivals with friends, other experiences, clothes, food, and millions of other things

    She will have the rest of her fucking life to contribute to 401k plans after graduating

    Let her live a little, she will only be college age once

    It's only $2k, though.
    Which goes a long way in college for the things I listed

    Afterwards? Not so much
    I'm pretty sure I would've blown through $2k in a month if I had extra cash sitting around as an 18 year old college student.
    When I turned 18 I was given something that my grandparents had invested when I was born, and it had accrued to something like $3,600. I believe I blew through it within 6 months.
    When I turned 18 I was well into selling weed and then reinvesting the proceeds into meth and oxy for my personal addiction. What a fucktard I was.

    I have a 529 for my oldest. He doesn’t know yet but he’ll spend his jr and sr yr of HS at the local CC so he’ll graduate HS with an associates. He’ll then have a some scratch to go get his bachelors. On his own if he wants his masters.

    Starting 529’s earlier with the other lil fuckers so they’ll have a lot more. They’ll go the CC route as well.

    Cool plan, I guess. Even cooler that I won’t give my kids a choice.
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  • El_KEl_K Member, Swaye's Wigwam Posts: 1,201 Swaye's Wigwam
    College? The world needs ditch diggers too!
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  • BleachedAnusDawgBleachedAnusDawg Member Posts: 11,456
    El_K said:

    College? The world needs ditch diggers too!

    Grave diggers. We talkin' about COVID, man!
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  • PurpleThrobberPurpleThrobber Member Posts: 44,030 Standard Supporter
    Let her spend it and fuck around like a college kid.

    $2K could be the difference between having a good college experience and turning tricks for books/tuition like that gal at Duke a few years back.

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  • dirtysouwfdawgdirtysouwfdawg Member, Swaye's Wigwam Posts: 12,980 Swaye's Wigwam
    PurpleThrobber said:

    Let her spend it and fuck around like a college kid.

    $2K could be the difference between having a good college experience and turning tricks for books/tuition like that gal at Duke a few years back.

    That was a great story
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  • Pitchfork51Pitchfork51 Member Posts: 26,938
    She's gonna get a gender studies degree and end up in hr regardless.
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