Transcripts

"Money File"-Growing A Teen Millionaire

SUSIE GHARIB: In the "Money File" tonight, making your teen a millionaire. Here's Harriet Johnson Brackey, personal finance columnist at the "South Florida Sun Sentinel."

HARRIET JOHNSON BRACKEY, PERSONAL FINANCE REPORTER, SO. FLORIDA SUN- SENTINEL: You can, this summer, start your teenager down the road to a well-funded retirement starting from that very first job, mowing lawns or scooping ice cream. It's no secret strategy here. It's a Roth IRA. Your teenager can contribute up to the amount he or she earns up to $5,000. And what a difference that will make. Talk about a 10-year savings plan. At 15, your teen puts $3,000 into a Roth and then contributes $2,000 a year through age 25. Then he or she stops contributing. If that money goes into a broadly diversified portfolio of 60 percent stocks and 40 percent bonds, it will grow substantially by the time your teenager retires, very substantially. According to a broad stock market simulation that the mutual fund company Vanguard produced, the median portfolio value would be more than $1 million. Your teenager, a millionaire or, a tax-free millionaire. Because the money's in a Roth, it is tax-free when it's taken out. So let your teenager roll her eyes when you talk about saving for retirement. There's a lot of power in starting to save early in life. Tell them, they can be millionaires. I'm Harriet Johnson Brackey.