Why in the world would a 12 yo want to encumber their money in a Roth for 47 1/2 years? Especially since they are not paying taxes now since in both cases growth would be tax free.
Put it in Total World Stock or Total Stock in a taxable account for now... they will have more flexibility on using it and can always use the balance for a Roth later when it makes more sense.
I had to read this a second time to get it: putting it in a taxable account now allows for more flexibility. I agree.Why in the world would a 12 yo want to encumber their money in a Roth for 47 1/2 years? Especially since they are not paying taxes now since in both cases growth would be tax free.
Put it in Total World Stock or Total Stock in a taxable account for now... they will have more flexibility on using it and can always use the balance for a Roth later when it makes more sense.
I had to read this a second time to get it: putting it in a taxable account now allows for more flexibility. I agree.
But maybe flexibility isn't desired. For instance, and I don't know that this is the case, but say the baby sitter got to keep/spend their earnings, and parent/savvy understander of compound interest and taxes matches the baby sitting funds, places it in a Roth with the understanding that it's not to be touched for 47 1/2 years. Of course at the age of majority, the "youth" can do with it what they wish, including taking it all out and paying penalty and taxes on the gains.
If you opened a Roth IRA for a 12 year old today (funded with babysitting money) would you leave any portion of it in a money market and wait for market correction before buying index funds or invest it all now?
If you opened a Roth IRA for a 12 year old today (funded with babysitting money) would you leave any portion of it in a money market and wait for market correction before buying index funds or invest it all now?
Can you even invest in an IRA if your only income is babysitting money? Don't you need to file taxes and have an official AGI so you know how much you can invest?