Andrea Coombs at Marketwatch doles out the advice for teenagers in a new article, answering the question of where teens should keep the money they earn.
Not surprisingly, the advice is eerily similar to the advice an older person might receive: Create an emergency fund in a high-yield savings account first, then fund a Roth IRA, and with anything left over, let them experiment in the stock market within reason.
But there is the issue of college. Any funds saved by a potential college student count against her when it comes to qualifying for federal financial aid. That penalty is shrinking in 2007, but some people might consider keeping the teen’s money in an account owned by a parent until the kid is out of college. Other advisors say the benefit of letting the teen manage his own money, keeping them involved and vested, outweighs the slight financial aid disadvantage.