Roth IRA Success Story – How to Get $50,000 Tax-Free Money For Your Kids

The Roth IRA Movement may be almost two weeks old, but that’s not going to stop from keep promoting it to potential new investors.

If you haven’t started a Roth IRA yet…then do!   Here’s some good places to open a Roth IRA super fast.

The following email was sent to me by a loyal reader who was so excited about the Roth IRA movement that he had share his own success story.

This story is unique though in that it didn’t involve just him;  it involved his two daughters.

This is a great read for any parent that wants to show their kids the power of tax-free money.

Here’s the story….

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Jeff: A number of years ago I took a unique approach to a Roth IRA using it as an inducement to have my children get summer jobs while in high school. When they were 15 they began to learn about the benefits of a Roth IRA and certainly knew what one was.

Pretty good right?

I offered to match their (relatively small part time summer job) earnings dollar for dollar. They kept their earnings and I matched their earnings in a Roth IRA.

They opened an Roth IRA with my contribution (equal to their earnings, so as to be in compliance with the law we rounded down to the lower $100) and initially invested the contributions in a mutual fund where the contributions in their first years were under $1,000,

Note:  Here’s my post that talks about the rules of opening a Roth IRA for your child.

I continued to provide a match each year through high school (where they never were earning enough to max out the contributions) they were watching what was going on and becoming on the look out for businesses they thought might be good investments.

Living in the real world, they became aware of companies that I was not familiar with and while adverse to risk they found a few winners that would have been great investments, but were missed due to the aversion to risk…but those were good lessons too.

“Dad’s Match”

Since graduating from high school and all through their college years we continued the process of “Dad’s match” and they happily watched their conservative investments grow.

They have learned that “time” is a friend when investing and the benefit of investing early (hard to teach a child about retirement before they have graduated from high school) but I accepted that challenge and it was a profitable lesson for them…that “risk” is something that needs to be carefully evaluated.

My two daughters are now out of college and since graduation I have continued to offer this “match” which is now obviously maxing out their contributions each year. At 28 and 30 my daughters are now selecting individual stocks and making good investing decisions. They moved some of their Roth IRA funds to cash in 2008 and moved some of them back into the market in 2009 and 2010 learning that a $.02 interest rate is only good for so long and that got those funds back into the market.

Lessons Learned

They have learned a lot about investing over the last 15 and 13 years respectively and have Roth IRA balances in excess of $50,000 +.

Editor’s note:  How freakin’ cool is that?   What a great start to their investing life!

They are appreciative of my “match” that is more than a father’s love, it is a lesson in investing that “pays dividends”.

I have told a lot of people what I have been doing and have found no one else that has done this.

It is the absolute best way to help your children financially and to teach them about investing and to help them learn about risk tolerance. As they grew older they became more willing to accept risk and reward and have learned what their risk tolerance is…which is now one that now has a long range focus and they have a great “head start”.

I have enjoyed receiving your emails over the years and while you are not local to me, I feel like I know you from your emails.

You should share these SUCCESS STORIES with your clients and readers.

Editor’s note:  I just did:)

By the way, I have a Roth 401K that I have been funding to the max for several years since it became an investment option at my work approximately 4 years ago. This investment tool is another great addition to saving in a Roth IRA that you should include in the BEST INVESTMENT TOOLS available.

I will pass this along to my daughters so they too can sign up for your email news letters. KEEP UP THE GOOD WORK!

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Do you have a Roth IRA success story?  If so, please share in the comments below.

 

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Comments | 5 Responses

  1. Andrea says

    I opened up a Roth IRA this year as did Eric! We are super excited about our self directed Roth because we can do so much with it. Obviously with Eric’s real estate obsession, we have found ways to complete real estate transactions with our Roth’s combined! Probably our only regret is not opening them up sooner!

  2. says

    This is such a great story. A great idea. Hopefully by the time my boys are in their teens, I’ll have my finances together enough to do this. I would love to teach them early on in life. Thanks so much for sharing.

  3. says

    Love it!!

    My oldest son recently got his first regular paying job. A couple of months ago, we setup a Roth IRA in his name – and he is making regular monthly contributions to it. While I’m not fully matching what he makes, I believe this is still getting him off to a great start! In addition, this is money that will not be “seen” when we begin the college financial aid process.

    Interestingly, last night we just happened to be talking – and he mentioned how he might be the only one at his student (or one of very few) who have an IRA or know what one is. And…he seemed pretty proud of where he was on the financial planning curve.

    Again – I love what what shared in this article, and I’m going to think about how that could apply to where we currently are with our son, too.

    Great stuff!

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