The best way to get started

[Pelican Press 0]

The best way to get started

When it comes to teens and money, there is often a disconnect.

Overall, teenagers are taking a greater interest in their own long-term financial health — although far fewer understand basic retirement planning.

In a recent survey of 13- to 18-year-olds, 83% said they had already thought about their retirement, according to

This is the hidden content, please

• Sign In
• or
• Sign Up

and MissionSquare.

But most teens mistakenly believed saving money in a bank account was the best long-term strategy. Only 45% said investing in stocks and bonds with the help of a financial advisor, which would offer a greater long-term return, was the preferred way to go.

More from Your Money:

Here’s a look at more stories on how to manage, grow and protect your money for the years ahead.

“This research shows retirement is more top-of-mind for teens than one might think,” said Jack Kosakowski, Junior Achievement’s president and CEO. “While young people have given retirement planning some thought, it’s apparent they still need information on the best way to go about it.”

‘The greatest money-making asset you can possess’

Although retirement can seem very far away, particularly for those just starting out, teens have a unique opportunity others do not, according to Ed Slott, a certified public accountant and founder of Ed Slott and Co.

“The greatest money-making asset you can possess is time,” he said. “Someone who starts at 15 has a huge advantage even over someone who starts at 25.”

Slott recommends opening a 

This is the hidden content, please

• Sign In
• or
• Sign Up

Contributions to a Roth IRA are taxed up front and earnings grow tax-free. In retirement, withdrawals are completely free of tax and penalties (as long as the account has been open for at least five years).

Since there are no age restrictions, anyone with earned income — say, from a summer job — can contribute.

Even if a teen only puts some money away, parents can add funds on their child’s behalf, as long as the combined amount doesn’t exceed the teenager’s earned income for the year. Once contributed, the money inside a Roth IRA account can be invested appropriately to suit any type of long-term goal.

In Christopher Jackson’s 12^th grade personal finance class, students open Roth IRAs with an initial grant of $100 from the community, which they then learn how to maintain on their own. Jackson, who teaches at DaVinci Communications High School in Southern California, tells his students that “this is going to be the most important class they are going to take in their life.”

“My No. 1 goal is to affect their children’s children,” he recently told CNBC.

How Roth IRAs help you start saving

While there is a maximum IRA contribution limit of

This is the hidden content, please

• Sign In
• or
• Sign Up

Meanwhile, both the investment and all the interest, dividends and growth on these assets will accumulate tax-free over the years.

If there are more immediate needs before hitting retirement age, account holders can withdraw their contributions at any time without taxes or penalties if, for instance, they need the money for college or a down payment on a house down the road, according to Slott.

However, Slott advises young adults to view tapping these funds as a last resort.

“Roth money is the last money you should touch because that money is growing the fastest and it will never be eroded by current or future taxes,” he said.

This is the hidden content, please

• Sign In
• or
• Sign Up

This is the hidden content, please

• Sign In
• or
• Sign Up

Generation Y,Generation Z,Individual retirement accounts,Personal finance,Breaking News: Investing,Investment strategy,Retirement planning,Life,Personal saving,business news
#started

This is the hidden content, please

• Sign In
• or
• Sign Up