Am I Too Young to Invest?

If you're old enough to work, you're old enough to invest. There is this thing called a Roth IRA. You may never have heard of it, but it may be one of the best things you can do for your future self while you're still young.

IRA just stands for Individual Retirement Account. A Roth IRA, named after Senator William Roth, is simply one that you fund using the money you receive after your taxes are taken out. If you've earned money by working, meaning you're not getting by completely on a stipend or allowance given to you by your parents, then you are eligible to open up a Roth IRA. Since Roth IRAs are funded with after-tax money then, if you meet the requirements, you won't have to pay taxes on them when they're cashed in later on. It's possible that you may not be taxed at all depending on how much you earn. Since younger people tend to be in lower tax brackets, that means more money for you and less going towards taxes. This is the main advantage to opening a Roth IRA while you're young rather than just sticking your money into a savings account.

If you're earning your money through a cash paying job, such as walking dogs or helping people in the neighborhood with their computers, then you obviously won't be receiving a W4 or W2 form come tax time so you will need some other kind of proof that your money is your own income. The best way to do this is to file a tax return even if you haven't made enough to be required to do so. Then you can open your Roth IRA. A parent or guardian's signature will possibly be required if you're still a minor. That means that you won't be fully in charge of the account until you're of legal age so if you don't feel you can trust your parent with your money then I would recommend waiting until you've hit 18 before you invest. If that's the case then place your money into a high yield savings account or cds until you're old enough to fund your IRA.

A lot of companies require a minimum amount to open a Roth IRA, but there are plenty that don't. Shop around for which one would work best for you. If you believe a company with a minimum is the better one for you to use then, again, place your money somewhere that it can still be earning you some interest until you have enough to meet the required amount for opening the IRA.