Markus Andrews

If you’re self-employed, hiring your kids could provide tax benefits.
You could deduct wages as a business expense and fund your child’s Roth individual retirement account.
However, you need to understand state and federal labor and tax laws first, experts say.

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If you’re self-employed, hiring your kids could provide tax benefits — provided you follow labor laws and IRS rules, experts say.  
Small businesses hiring their own children is a popular topic among social media influencers on platforms such as TikTok, Instagram and YouTube. But tax professionals say they are often battling misinformation from such posts.

“Most of the videos on TikTok have a kernel of truth to them, but they’re embellished or it only makes sense in very specific situations,” Matt Metras, a Rochester, New York-based enrolled agent and owner of MDM Financial Services, previously told CNBC.
More from Personal Finance:This retirement account can offer triple-tax benefits for teens this summerA 20% down payment is ‘definitely not required’ to buy a house, economist saysElizabeth Warren wants student loan borrowers to know bankruptcy is easier now
“But when you have a 60-second video, you aren’t trying to convey that nuance,” Metras said.
If you’re planning to hire your children this summer, here are some key things to know, according to financial experts.

Employing your kids can be ‘tax-savvy’

“Hiring your child can be a tax-savvy move,” said certified financial planner Sean Lovison, founder of Philadelphia-area Purpose Built Financial Services. “Their wages can be deducted as a business expense, which can lead to significant savings for your small business.”

For 2024, the federal standard deduction for single filers is $14,600.
“If your child’s income falls within the limits, they may not owe any income tax, which can be a win-win,” said Lovison, who is also a certified public accountant.
Plus, payments to children may avoid Medicare and Social Security taxes, depending on the child’s age and your legal business structure, according to the IRS. 

If your child’s income falls within the limits, they may not owe any income tax, which can be a win-win.

Sean Lovison
Founder of Purpose Built Financial Services

Once your child has “earned income,” or wages from employment, they can make Roth individual retirement account contributions, which can be powerful for younger savers, experts say.
There’s a triple-tax benefit for kids: They typically pay little to no taxes on contributions, plus growth is levy-free and withdrawals are generally tax-free in retirement, according to CFP Carol Fabbri, managing partner of Fair Advisors in Conifer, Colorado.
“It is never too early to get in the habit of saving,” she added.
However, you need to watch the contribution limit for 2024, which is your child’s total earnings or $7,000, whichever is smaller.

What to know before hiring your kids

Before hiring your children, it’s important to know state and federal labor laws, along with tax rules, experts say.
“Some states pretty much ban you from hiring children under the age of 14 under any scenario,” Lovison said.
If hired, your children must do real work for the business, and their compensation should be reasonable to match their tasks.
“Record-keeping is non-negotiable,” Lovison said. “It not only helps you navigate the tax landscape but also serves as a valuable resource if any questions arise about your child’s employment.”
Payments to children are subject to income tax withholding regardless of the child’s age, according to the IRS. Hiring kids as W-2 employees and withholding taxes “covers your bases,” but they’ll get a full refund of taxes paid if they’re under the standard deduction, Lovison said.    More

A Walmart store in Florida City, Florida, May 2, 2024.
Jakub Porzycki | Nurphoto | Getty Images

Investors’ worries around stubborn inflation and the timing of Federal Reserve rate cuts is resulting in rocky markets.
While macro challenges could affect near-term sentiment, investors with a long-term time horizon can use Wall Street analysts’ stock research to inform their investment decisions and enhance portfolio returns.

Here are three stocks favored by the Street’s top pros, according to TipRanks, a platform that ranks analysts based on their past performance.
Monday.com
Workplace management software maker Monday.com (MNDY) is this week’s first stock pick. The company impressed investors with upbeat first-quarter results, driven by strong demand for its products across all end markets.  
In reaction to the quarterly report, Goldman Sachs analyst Kash Rangan reiterated a buy rating on Monday.com stock and increased the price target to $300 from $270. Despite the post-earnings rally, the analyst still thinks that the stock is undervalued.
Rangan called Monday.com “a rare example of a company with visibility into improving NER [net expansion rate], growing momentum in the enterprise, SMB [small and medium businesses] strength, and healthy clip of FCF [free cash flow] margin.”
Rangan noted that the company is exhibiting solid pricing power within the small- and medium-sized business space, which reflects its high-value proposition.

Overall, the analyst expects the rate of revenue deceleration to moderate, with net new revenue growth likely starting to stabilize. He said he thinks Monday.com’s unified platform will support a durable margin profile and boost long-term revenue growth.
Rangan ranks No. 388 among more than 8,800 analysts tracked by TipRanks. His ratings have been successful 60% of the time, with each delivering an average return of 10.7%. (See Monday.com Hedge Fund Trading Activity on TipRanks)
Walmart
Next up is big-box retailer Walmart (WMT), which recently delivered better-than-anticipated revenue and earnings for the first quarter of fiscal 2025. The company’s results were fueled by robust e-commerce sales growth, supported by store-fulfilled pickup and delivery, as well as strength in the third-party marketplace.
In reaction to the print, Baird analyst Peter Benedict reaffirmed a buy rating on Walmart stock and increased the price target to $70 from $65. The analyst said he thinks the company’s focus on value and convenience continues to attract all customer cohorts, with the majority of the U.S. market share gains supported by higher-income households — that is, those with more than $100,000 in annual income.
The analyst’s increased price target reflects “WMT’s increasing momentum around reshaping its P&L through the scaling of higher margin/ROI [return on investment] accretive alternative revenue streams and automation initiatives.”
Benedict added that Walmart’s alternative revenue streams, including advertising, marketplace, fulfillment services, data monetization and Walmart+, carry higher margins and complement its core retail business.
The analyst estimates that these alternative streams generate about $7 billion in revenue. He expects profits from these growing businesses to be vital margin drivers that can help fund investments in Walmart’s other growth areas.
Benedict ranks No. 68 among more than 8,800 analysts tracked by TipRanks. His ratings have been profitable 69% of the time, with each delivering an average return of 15.1%. (See Walmart Technical Analysis on TipRanks)
CyberArk Software
Finally, let’s look at the cybersecurity company CyberArk (CYBR). On May 20, the company announced an agreement to acquire machine identity management provider Venafi for $1.54 billion from private equity firm Thoma Bravo.
CyberArk expects the deal to be closed in the second half of this year. The company anticipates that Venafi’s complementary machine identity security solutions will expand its total addressable market by about $10 billion to nearly $60 billion.
TD Cowen analyst Shaul Eyal reiterated a buy rating on CyberArk stock with a price target of $300 after the deal’s announcement. The analyst noted that the company’s previous acquisitions, including Idaptive, Conjur and Viewfinity, were quickly and effectively integrated and have delivered significant returns in recent years.
While Venafi represents CyberArk’s largest acquisition to date, Eyal said he thinks the company’s management team will maintain its strong M&A track record.
Eyal highlighted that the deal is expected to be immediately accretive to CyberArk’s gross, operating and cash flow margins. He added that the company is well-positioned to leverage huge revenue synergy opportunities through cross-sell, up-sell and geographic expansion. The company plans to capitalize on its extensive, global go-to-market network to distribute Venafi’s solutions.
“CYBR’s existing 8.8K customers represent early upsell/cross-sell opportunities (there is a ~200 customer overlap),” said Eyal.  
Eyal holds the 15th position among more than 8,800 analysts tracked by TipRanks. His ratings have been successful 68% of the time, with each delivering an average return of 26.7%. (See CyberArk’s Ownership Structure on TipRanks) More

Women and Wealth Events
Your Money

In the book “Women Money Power,” financial journalist Josie Cox tells the story of women’s fight for financial equality.
Despite marked improvements, she laments the fact that “women still only account for about a 10th of Fortune 500 CEOs” and that “men still vastly outnumber women in political leadership.”
“We know that biases about who and what makes a good leader are reinforced when the visible image of a leader doesn’t change,” Cox told CNBC.

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To understand why women are still fighting to catch up to men economically, author Josie Cox turns to the past. She doesn’t have to look too far back.
The Women’s Business Ownership Act, which allowed women to obtain business financing without a male co-signer, didn’t pass until 1988, Cox, a financial journalist, writes in her new book, “Women Money Power: The Rise and Fall of Economic Equality.” Women weren’t admitted into Ivy League colleges before 1969, and could be fired from their jobs for getting pregnant as recently as 1978.

“Pregnancy discrimination across corporate America is still rampant,” Cox said.

More from Women and Wealth:

Here’s a look at more coverage in CNBC’s Women & Wealth special report, where we explore ways women can increase income, save and make the most of opportunities.

Cox’s book traces the centurieslong battle by women to gain their economic equality to men, bringing many fascinating characters out of the shadow of history along the way. Speaking with CNBC this month, she said it is clear that the quest for justice has a long way to go.
(The interview has been edited and condensed for clarity.)

‘Money is a gauge of power’

Annie Nova: You give so many examples of how women, in the past, needed men to even engage with the economy. Why was our society set up that way?
Josie Cox: In societies that are set up around the principles of capitalism, money is a gauge of power. And women have historically just not had as much power as men.

In my book, I write about the concept of “coverture.”
Coverture is a legal practice rooted in English law that dictated that no woman or girl had an independent legal identity. At birth, a girl was covered by her father’s identity, and, when she married, by her husband’s. Under the laws of coverture, a woman didn’t even have the right to her own body, which meant that any wages she generated through her own labor legally belonged to her husband.
Gradually, the power of coverture has weakened. But even today, there are traces of its influences — the tradition of a woman taking a man’s name through marriage is an obvious example.

Arrows pointing outwards

Women Money Power by Josie Cox

AN: You write about how women could be fired from their jobs for getting pregnant until 1978. Do you know how common that was? What issues did this lead to for women? Are things much better today?
JC: It’s impossible to know how many women got fired for getting pregnant before 1978. It was just a commonly accepted and unremarkable thing to do.
Many women working in the paid labor market hid their pregnancies for as long as possible to avoid getting fired. When they did get fired, it was tough for many who needed the money.
Today it is, of course, illegal to fire a woman for getting pregnant. But as I write in my book, women still have to contend with bias and discrimination that is more subtle. Pregnancy discrimination across corporate America is still rampant.
AN: How was the repeal of Roe v. Wade a familiar story for women of previous generations? What are some of the economic consequences of the decision? 
JC: Access to health-care and reproductive rights are inextricably linked with women’s economic empowerment, and personal freedom. As such, the decision dealt a tragic blow to the progress we’d made toward gender equality over the preceding 50 years.
It will take time before we can gauge the precise cost — both economically and otherwise — of the severe abortion restrictions that have come into effect since the Dobbs decision, but it’s fair to say that it’s significant. 

Economy is ‘failing menopausal women’

AN: In what fields do we still need to see a lot more women?
JC: In many! Women still only account for about a 10th of Fortune 500 CEOs. Men still vastly outnumber women in political leadership.
We know that biases about who and what makes a good leader are reinforced when the visible image of a leader doesn’t change. So it’s critical that more women move into these positions of power.
At the same time, we need to ensure that we’re also chipping away at the ridiculous notion that men shouldn’t be primary caregivers and that they shouldn’t be doing as much unpaid labor as women.

AN: How is our economy, as you write, “failing menopausal women?”
JC: Menopause is still an unbreeched subject in most workplaces, but the reality is that it’s a hugely important thing to acknowledge.
As I write in my book, the age at which women tend to enter menopause — about 45 to 55 — is typically also the age at which they’ve gained enough professional and life experience to enter the most senior and lucrative jobs. The economic firepower of these people is enormous. But in many ways, the parameters of the workday and workplace just don’t work for them.
AN: Your book is filled with so many great stories of the women throughout history that fought for gender equality. Can you tell me one of your favorites?
JC: Dexter McCormick provided almost all of the funding that enabled the research and development necessary for bringing the first oral contraceptive pill to the American market. She was stranger than fiction.
Long before contraceptive devices were widely available in the U.S. — and at a time when they were, in some places, outright illegal — McCormick went to Europe, pretended to be a medical supplies buyer, bought diaphragms in bulk, sewed them into the linings of her coats and dresses and then smuggled them back to America where she distributed them.
She wanted women to be able to take control of their bodies and their lives, and she recognized early on something that we all know now: Access to reproductive health care is a condition for a woman being able to reach her full personal, professional and economic potential. 
The FDA [The Food and Drug Administration] approved the pill for contraceptive use in May of 1960, when McCormick was in her eighties. She went to see her doctor and got a prescription for it; not because she needed it, of course, but because she could.

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Even as inflation has subsided, grocery store prices are still high.
This week, politicians debated whether corporate greed or government spending is to blame.
To save money on food, experts say consumers may need to shift their habits.

Elena Perova | Istock | Getty Images

High inflation is subsiding, but many Americans have yet to see relief from elevated prices at the grocery store.
“Grocery prices skyrocketed during the pandemic, and in many cases, they’ve kept going up, even though the pandemic is over,” Sen. Elizabeth Warren, D-Mass., said at a Wednesday Senate hearing.

Shoppers may be infuriated to find certain grocery products, such as a pound of chicken breasts or a loaf of bread, go up from one week to the next, Warren said.
And they may be frustrated to find other products, such as a box of cereal or a package of spaghetti, come with fewer servings for the same price, she said. That trend is known as shrinkflation.
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Lawmakers are divided on what has prompted those elevated prices.
“Grocery prices are up because of good old-fashioned corporate price gouging,” Warren said. “And they can gouge consumers on prices because there’s only a small number of companies controlling every level of the food chain.”

Sen. John Kennedy, R-La., blamed government spending under President Joe Biden.
“When you spend this kind of money, you’re going to have inflation,” Kennedy said.
A recent Harris poll found that almost 3 in 5 Americans think the country is in an economic recession — even though it is not — with inflation a top concern.
“Inflation is coming down, but prices remain elevated,” said Mark Hamrick, senior economic analyst at Bankrate. “As long as prices are elevated, that means that affordability challenges persist.”

Where consumers may see signs of relief

One measure of inflation, the consumer price index, shows the food index was flat in April compared to the prior month.
Yet over the past 12 months, food was up 2.2%.
Certain categories, such as apples and eggs, have declined over the past year. Other items, such as juices and drinks and beef roasts, are up.
“I’m seeing a little bit of a light at the end of the tunnel, where it seems like the prices for some items are decreasing or flattening,” said Trae Bodge, a smart shopping expert at TrueTrae.com.
Still, for some households, the long-term higher food prices may be leading to financial stress. New research from the Urban Institute shows Americans may be saddled with debt after turning to credit cards, buy now pay later programs and payday loans to pay for groceries.

Food insufficiency — where households sometimes or often do not have enough to eat — is more prevalent for families with less than $50,000 in income and Black, Hispanic, disabled and younger adults, as well as parents living with children under 18, a recent Federal Reserve well-being survey found.
Some brands are stepping up their efforts to make food more affordable.
This week, Target announced plans to lower prices on about 5,000 items, including bread, fruit, vegetables, milk and meat.
As fast food prices rise, McDonald’s and Wendy’s are also adding lower-price options to their menus.

How to save money on groceries

To get the most out of grocery store trips, experts say it’s best to have a strategy.
“It’s a good opportunity to create smart shopping habits,” Bodge said.
Where possible, consumers can shift their purchasing habits — to eat at home rather than dine out or buy chicken instead of beef — to limit the effects of rising costs, Hamrick said.
“There is a range of opportunities to make choices and to substitute at lower prices and to get better value,” Hamrick said.

Visiting different retailers — both in person and online — may help to capitalize on sales and find the best value available.
If a store has a loyalty program, sign up for it to make sure your purchases are eligible for discounts or rewards, Bodge said.
Switching over to store or generic brands can also provide meaningful savings. Buying products in bulk may help save up to 40%, she said.
Certain websites and apps help make shopping more efficient.
Coupon sites like CouponCabin may provide discounts for ordering groceries online. Flashfood may provide alerts to deals on overstocked grocery items. Martie also provides offers on deeply discounted items.
“If you combine all of those things, you can save significantly on your groceries,” Bodge said.
The method of payment at the checkout counter may also lead to more savings, specifically concerning cash-back rewards through credit cards, she said. To effectively use those perks, it’s important to maintain a balance you can pay off each month.

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About 77% of future homebuyers have started putting money aside for a down payment, according to a new survey from Clever.com, a housing and real estate research site.
Buyers may try to put more money down to avoid mortgage insurance costs and even lessen monthly payments, but 20% is “definitely not required,” said Danielle Hale, chief economist at Realtor.com.

Phynart Studio | E+ | Getty Images

Coming up with the down payment as an aspiring homeowner can be a daunting task. Many have already begun working toward that goal.
About 77% of future homebuyers have started putting money aside for a down payment, according to a new survey by Clever.com, a housing and real estate research site.

More than half (57%) of potential buyers plan to put less than 20% down, the report found. The survey polled 920 recent and upcoming homebuyers in early April.
Buyers may try to put more money down to avoid mortgage insurance costs and even lessen monthly payments, but 20% is “definitely not required,” said Danielle Hale, chief economist at Realtor.com.
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In the first quarter of the year, the average down payment was 13.6%, up from 10.7% in the first quarter of 2020, according to Realtor.com.
The typical down payment for first-time homebuyers was 8% in 2023, compared to 19% for repeat buyers, based on transactions from July 2022 to June 2023, according to a survey from the National Association of Realtors.

Even at recent elevated levels, the average down payment is still well below 20%, a share that people typically think of as the gold standard when buying a home.
“By no means is this essentially the law of the land,” said Mark Hamrick, senior economic analyst at Bankrate.com.

‘The conundrum of the housing market’

One way to reduce your monthly mortgage payment is by putting down more money and borrowing less. But for many households, trying to accumulate a higher down payment can be challenging, Hale explained.
“It really showcases the conundrum the housing market is in where there’s not a lot of affordability,” she said.
Having enough savings for a down payment is a big hurdle for most buyers. Close to 40% of Americans who don’t own a house point to a lack of savings for a down payment as a reason, according to a 2023 CNBC Your Money Survey conducted by SurveyMonkey. More than 4,300 adults in the U.S. were surveyed in late August for the report.

Most homebuyers don’t put down 20%

Rising home prices make that 20% goal especially daunting. But the reality is, you don’t need 20%, experts say.
Nationally, the average down payment on a house is closer to 10% or 15%, Hale said. In some states, the average is well below 20% while some are even below 10%, she added.
“Not only is it possible to buy a home with less than 20% down, but this data show that a majority of buyers are in fact doing so,” Hale said.

Some loans and programs are available to help interest buyers purchase homes through lower down payments.
For example, the Department of Veterans Affairs offers VA loan programs that enable those who qualify to put down as little as 0%. Loans from the U.S. Department of Agriculture, referred to as USDA loans, are geared toward helping buyers purchase homes in more rural areas, and they also offer 0% down payment options.
Federal Housing Administration loans, which can require as little as 3.5% down for qualifying borrowers, are available to first-time buyers, low- and moderate-income buyers, as well as buyers from minority groups. Those are “designed to help close homeownership gaps among those targeted populations,” Hale said.
Even with a conventional loan, buyers’ required down payment could be between 3% and 5%, depending on their credit score and other factors.
“There are options,” Hale said.

A small down payment can come with extra costs

When you’re deciding how much of a down payment you can afford, tread carefully: There can be added costs associated with smaller upfront payments. While a lower down payment is one way to “attack affordability challenges,” it can be a “mixed bag,” Hamrick said.
With a lower down payment, you will need to borrow more from your lender, which raises the monthly cost of your mortgage, Hale said. A smaller down payment can also mean you don’t qualify for a lender’s best-available interest rate.
When you borrow more than 80% of a home’s value, you may also face the added cost of private mortgage insurance, or PMI.

PMI, generally, can cost anywhere from 0.5% to 1.5% of the loan amount per year, depending on factors like your credit score and down payment amount, according to The Mortgage Reports.
For example, on a loan for $300,000, mortgage insurance premiums could cost around $1,500 to $4,500 annually, or $125 to $375 a month, the site found.
Typically, your lender will cancel your mortgage insurance automatically once you reach 22% equity. You can request it to be removed after you reach 20% equity.
In some cases, buyers might choose to do what’s called a “piggyback mortgage,” or get a second mortgage to meet the 20% threshold and not have to pay for mortgage insurance, Hale said.
But, that second loan tends to have a higher mortgage rate, she said. More

Senator Elizabeth Warren, D-Mass., wants the U.S. Department of Justice to do more to educate student loan borrowers about the new, easier path to filing for bankruptcy.
In a new letter reviewed by CNBC, she wrote to Tara Twomey, director of the U.S. Trustee Program at the Department of Justice, urging her “to continue to educate borrowers, attorneys, and courts” about the Biden administration’s updated more lenient approach for student loan holders.

U.S. Senator Elizabeth Warren (D-MA) faces reporters during a break in a bipartisan Artificial Intelligence (AI) Insight Forum for all U.S. senators at the U.S. Capitol in Washington, September 13, 2023.
Julia Nikhinson | Reuters

Elizabeth Warren wants more student loan borrowers to know that it is now easier to part with their debt in bankruptcy court.
In a May letter reviewed by CNBC, the Democratic senator from Massachusetts, along with Sen. Sheldon Whitehouse, D-R.I., wrote to Tara Twomey, director of the U.S. Trustee Program at the Department of Justice, urging her “to continue to educate borrowers, attorneys, and courts” about the Biden administration’s updated approach for student loan holders.

Warren, a former Harvard Law School professor who taught courses on bankruptcy, is referring to guidance released by the U.S. Department of Education and Justice Department in the fall of 2022. That joint memo was intended to have federal student loans be treated more like other types of debts in bankruptcy, experts say.
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Over the years, policymakers added extra stipulations for the discharge of education loans, expressing concerns that young people would try to ditch their obligations after graduating. As a result, borrowers were often asked to prove a “certainty of hopelessness,” and government lawyers battled most requests. Between 2011 and 2019, more than 99.8% of borrowers who filed for bankruptcy did not get their student loans discharged, the senators wrote in the May 23 letter.

Discharging student debt in bankruptcy is now easier

The new guidance has already led to changes.
In the first 10 months of the Biden administration’s more lenient process, student borrowers filed more than 630 bankruptcy cases, a “significant increase” from recent years, it reported last year. The administration said that the majority of those borrowers received full or partial discharges of their education debt.

CNBC spoke to bankruptcy attorneys earlier this year who said they noticed the difference.
“While the government used to fight discharge aggressively in almost every case, there is now a policy to agree when the borrower can show financial need and a history of good faith efforts to pay the loans,” Latife Neu, a bankruptcy lawyer in Seattle, said in March.
“I’ve helped several people take advantage of the expanded ability,” Neu said at the time.

Many borrowers are ‘not aware’ of changes

Yet Warren says more work still needs to be done.
“More than 43 million borrowers in the United States carry a total of $1.6 trillion in student loan debt, and more than 2 million borrowers have been repaying those loans for at least 20 years,” Warren and Whitehouse wrote.
“DOJ and ED must work harder to encourage borrowers to seek relief — and deliver on that relief when requested,” they added.
The Department of Justice and Education Department did not immediately respond to a request for comment.

‘Do [it] now before November’

Malissa Giles, a consumer bankruptcy lawyer in Virginia, agreed that the government needed to better inform borrowers and lawyers about the new process.
“Most folks I see are not aware of the new bankruptcy discharge options,” Giles said. Several of her clients have benefited from it.
Many law firms continue to refuse to take on these cases, she added, because of the low success rate of the past. She said one attorney told her that he did not want to spend the time updating his strategy for the new procedure before the election. (If former President Donald Trump wins the election, experts say, there’s no guarantee the more lenient approach wouldn’t come to an end.)
“But for me, that makes it even more important to take advantage of the litigation approach now, rather than waiting,” Giles said. “I tell current clients that if they want to pursue discharge and are eligible, they should do [it] now before November.”

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If your children are working summer jobs, they could be contributing to a Roth individual retirement account.
Roth IRAs are “triple-tax efficient” for many kids and could kickstart long-term compound growth, according to Carol Fabbri, managing partner of Fair Advisors.
However, you can’t contribute more than your child’s “earned income” for the year.

Sturti | E+ | Getty Images

If your kids are working summer jobs, it’s a prime opportunity to help them open a retirement account and start saving for the future, experts say.
Roth individual retirement accounts can be “triple-tax efficient” for teenagers, according to certified financial planner Carol Fabbri, managing partner of Fair Advisors in Conifer, Colorado.

Roth IRAs are funded with after-tax dollars, but teens often earn less than the standard deduction, which means they won’t owe taxes on the income used for contributions. The standard deduction for single filers is $14,600 for 2024.
Plus, Roth IRAs offer tax-free growth on investments, and withdrawals in retirement are generally tax-free, Fabbri explained.
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If a 15-year-old invested $500 this summer, they could have almost $10,000 when they retire in 50 years, assuming a 6% growth rate, Fabbri said.
Of course, the power of long-term compound growth, or returns on your returns, only magnifies the sooner you start saving and investing, experts say.

More than 8 in 10 teenagers are already thinking about retirement, but most mistakenly think savings is the best long-term strategy, according to a recent survey from Junior Achievement and MissionSquare.

How Roth IRAs for kids work

If a child is considered a minor, parents can open a “custodial IRA,” which is a retirement account for a minor.
The parent manages the account and investments until their child reaches the age of majority, which is typically 18, but could be 21 in certain states.
While there’s no age minimum for Roth IRA contributions, children must have so-called “earned income,” or compensation from a job, to qualify.
For 2024, the IRA contribution limit is $7,000, but children can’t deposit more than their earned income for the year. You can make 2024 IRA contributions until the tax deadline in 2025.
Another perk of Roth IRAs is flexibility. The account owner can withdraw contributions any time without taxes or penalties — and there are certain exceptions to the 10% penalty on earnings withdrawals before age 59½.

Offer a ‘match’ to incentivize contributions

“I am a huge fan of kids opening Roth IRAs with summer income,” said CFP Tammy Wener, principal of RW Financial Planning in Lincolnshire, Illinois.
Wener’s children — a high schooler and a college student — each have a Roth IRA, and she provides a “match” to incentivize contributions.
However, the child’s Roth IRA contribution and parent match can’t exceed the child’s earned income for the year, experts warn. Parents need a “clear paper trail,” including income tax returns that report the child’s yearly income, Wener said.
The IRS levies a 6% penalty on excess IRA contributions, which you can avoid by withdrawing the extra amount by your federal tax filing deadline. More