When it comes to saving for any purpose, the most important thing to do is to start as soon as possible. Your money can only grow when it is invested, and the longer it is invested the better. Of all the things to save for in life, retirement has the longest possible time horizon. Some people never save for retirement. Others wait until they are in their 30s, 40s, or 50s to start savings for retirement. It can be hard to focus on saving for retirement because it seems so far out there in the future, but the earlier you start saving for retirement the better.
For most teenagers getting their first job at age 14 or 15, the last thing they have on their mind is saving for retirement, but that is a great time to start! This is where a wise parent or grandparent can step in to help and open a custodial Roth IRA for a child. Any money invested in one’s teenage years has many, many years to grow. The following example shows how important a factor time is when saving for retirement:
It is absolutely possible! Parents or grandparents can help set children up for retirement by getting them started at an early age and even putting aside some money for them. A custodial Roth IRA is a great choice. Contributions to such accounts are limited to amounts actually earned by the child in a given year, but the amounts actually invested can come from an adult (parent, grandparent, guardian, etc.).
Under current tax law, amounts withdrawn from a Roth IRA are never taxable. Additionally, amounts invested in a Roth IRA can always be withdrawn at any time should a hardship arise.
Conclusion
There are always many competing priorities for your money: housing, food, education, entertainment, healthcare, etc. It is never easy to juggle a budget and have enough money to do everything. A balanced approach to personal finances is most important. It takes time, effort, and constant attention to stay on top of your personal finances. It is easy to put off saving for future needs such as retirement when you are young because it seems like these things are so far out there in the future and there are many other goals to focus on. But if you are not careful, the years will fly by and you will find that you will continue putting it off.
The best thing to do is just start, or help your child or grandchild start. Every little bit helps – even if you only invest a few dollars at a time. Make the first step and start saving for retirement. You will be happy that you did!