By Dave Ramsey
Q. My daughter is 14, and she was recently offered a steady weekend modeling job. Do you have any advice on how to handle the money she earns?
A. In terms of investing some of the money she’ll make, a Roth IRA would be pretty cool. You would have to oversee it, of course, and you’d have to file a tax return, but starting something like this when she’s 14 would help set her up for some serious money later.
I think the biggest thing, however, is to make sure you create lots of teachable moments for this young lady. There are three areas every child should learn about when it comes to finances: spending, saving and giving. If she’s working and earning money, she should be able to spend a little and enjoy the fruits of her labors – within reason, of course.
Saving for the short term might include putting money aside for a car or even college. Long-term goals would include the Roth IRA, so she would have a head start on being able to retire with some dignity one day. Then you should always make sure to give some. Whether it’s tithing to your church or finding other good causes, giving helps others and it’s good for the giver. When we give, it helps us realize that we’re not the center of the universe. It also makes us a little more Christ-like.
This is a phenomenal opportunity for your daughter. It’s also a great chance for you, as a parent, to involve her in the process and teach her important lessons that will last a lifetime.
Q. When should a couple think about creating a family trust?
A. A family trust can take different shapes. Couples with young kids sometimes consider creating a trust in the event that they both die unexpectedly. In these situations, a family trust would be managed for the care of minor children.
Some people also create trusts for the purpose of avoiding estate taxes. These trusts aren’t as common, because you don’t have to worry about estate tax problems unless you have assets in excess of $5 million, based on current law.
But to be honest: I can’t think of a situation where you’d want to create a family trust to manage money while you’re alive. Unless, of course, it contains some kind of estate planning implications.
Follow Dave Ramsey on Twitter at @DaveRamsey and on the web at daveramsey.com.