Q&A of the Week May 29, 2024

Question

How do you recommend kids with summer jobs invest their income?

Answer

A Roth individual retirement account (Roth IRA) may be a great option for teens with summer jobs. The standard deduction for single filers for 2024 is $14,600. Many kids won't earn more than this amount, so they won't owe taxes on their contribution.

Parents of minors can open a custodial IRA. Parents manage the account until the child turns 18 (or 21 in some states). The 2024 IRA contribution limit is $7,000, and this must come from earned income.

Roth IRAs offer tax-free growth on investments. For maximum growth, teens should start saving early.

If you have questions, please talk with a tax professional.