The Power of Starting Early
Youth savings accounts and Roth IRAs benefit enormously from time. A 15-year-old investing $300/month at 7% annual return until age 65 ends up with over $1.4 million — from only $180,000 in contributions. The earlier you start, the more compound interest does the heavy lifting.
In the US, the Roth IRA is especially powerful for young earners because contributions are made with after-tax dollars, and all growth is tax-free. The 2024 contribution limit is $7,000 per year ($583/month) for those under 50 with earned income.
Frequently Asked Questions
High-yield savings accounts currently offer 4–5%. Broad stock market index funds have historically returned ~7–10% annually over long periods. For conservative estimates, use 4–5%; for long-term investment scenarios, 7% is a common benchmark.
If the teen has earned income, a Roth IRA offers tax-free growth and is generally better for retirement savings. A custodial account (UTMA/UGMA) has no income requirement and more flexibility for non-retirement goals like college or a first car.