Early Life Investments
A Family Financial Head Start
“The best time to build lifelong money habits is when you are young. The second-best time is today.”
“The best time to build lifelong money habits is when you are young. The second-best time is today.”
From the Blog — June 19, 2026
The average teen summer job pays $17 an hour in 2026. The wage is temporary. The Roth IRA space it unlocks is permanent — and most families let it expire unused.
School is out, and across the country teenagers are starting summer jobs. NPR reported this month that even in a tighter market, the benefits of a first job go well beyond the paycheck. I agree — but I want to talk about the part of the paycheck almost everyone ignores. Every dollar of earned income your teen brings home this summer unlocks something that expires at year-end if unused: contribution space in a custodial Roth IRA.
Suze Orman made this case in early June, and her example is worth repeating: $5,000 invested in a Roth IRA during a teen’s first summer job can grow to roughly $150,000 over 50 years. Wait ten years to start, and the same $5,000 grows to only about half that amount.
There is no minimum age for a Roth IRA. The only requirement is earned income — W-2 wages, or legitimate self-employment income like mowing lawns or babysitting. If the child is under 18 years old the parent opens a custodial Roth IRA, the teen is the owner, and the parent manages it until the age of majority. Both Fidelity and Schwab offer them with no fees and no minimums.
The contribution limit for 2026 is $7,500 or the teen’s total earned income, whichever is smaller. Run the math on the average summer: $17.00 an hour at 320 full-time summer hours is about $5,440 — nearly the entire annual limit unlocked in ten weeks.
In our house we run a match. When my oldest started his first real job at the mall, we agreed that for every dollar he contributed to his Roth IRA, I would match it. It is a 100% guaranteed return — better than any employer 401(k) match he will ever see — and it teaches the matching habit a decade before HR explains it to him. He learned what “free money on the table” means by picking it up, not by hearing about it. At the end of the year when he had maintained his contribution I made sure I contributed the maximum he could based on his income.
I started smaller with my youngest. His first Roth contribution was $20 — money he earned watering a neighbor’s plants. The dollar amount was almost comical. The point was not the dollars. The point was that he now owns an account, watches it, and asks questions about it. Experience teaches what instruction cannot. Since we opened his account 4 years ago now, with basic contributions of $800 over that time it has now grown to $1,500 at age 13.
You cannot get the years back. Every dollar your child earns this summer creates room in a Roth IRA, but that room expires when the year ends — Unused, it’s gone for good.
A teenager earning a few thousand dollars a year pays effectively zero federal or state income tax. That makes the Roth IRA’s trade — pay tax now, never again — hard to beat for a young investor with decades of tax–free growth ahead. The money grows tax–free for 40 or 50 years, and qualified withdrawals in retirement are tax–free and not subject to required minimum distributions. And if life happens, contributions (not earnings) can be withdrawn at any time without taxes or penalties, which makes the account far less scary as a first commitment than most parents assume.
One practical note for self-employment income: keep simple records. A notebook or spreadsheet listing the date, the work, who paid, and the amount is enough documentation for a kid’s lawn-mowing income. We track my youngest’s jobs in an Excel sheet that shows all his income over the years. I have created a free Paycheck Tracker for children’s self-employment income to help you log your child’s earnings, or an hourly-wage version if they have a job with W-2 income. You can find these and more on the Tools page.
Most financial advisors suggest directing 15% of household income toward retirement investing, prioritizing Roth IRAs and good growth stock mutual funds. It is sound advice for adults. What the standard advice skips is that your child can hold a Roth IRA decades before their first full-time job, with a longer compounding runway than any adult will ever have. The 15% rule starts at 25. The head start starts at the first dollar earned.
If your teenager is working this summer, open the custodial Roth IRA this month, not in December. Contribute something — $100 matters, $20 matters — and consider a parent match to make the contribution lesson stick. The wage is temporary. The habit, and the four decades of compounding, are not. If you want help making the case to your teen, the books that have worked in our house are in the book reviews.