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Ask Dave

A Model Opportunity

Cynthia has a daughter who has gotten a job, and it's just the opportunity she needs to start teaching about money.

QUESTION: Cynthia in California says her daughter was offered a modeling job. They want to know what to do with the money she earns. Dave talks about how this is a golden opportunity to create teachable moments for giving, saving and spending.

Dave's ANSWER: She can do a Roth IRA, and that would be very cool.

The thing that I want to do more than anything is to create teachable moments for her out of this. There are three areas once you learn to work when you are a kid, and that’s giving, saving and spending wisely.

We want her to be able to spend some of it and enjoy the fruits of her labor within reason. She might be saving up for her first car or enjoying a little bit of it on the weekends. But if she’s my kid, she’s going to be coached by me on that. Just like I teach them to brush their teeth, I teach them to handle money.

Then we will give some of it. We’re Christians, so it would be obvious for us in that setting. The last category is saving and investing. Saving for the short term might be something like a car. Long term might be the Roth IRA. If you work the numbers and show her what the Roth IRA could be, that could be phenomenal.

We actually helped our kids while they were working. We did their Roth IRAs for them, but you have to file a tax return to do that. But it sets them up for some serious money when you start doing it at 14 years old. I would do that, but let her learn about each one as you’re doing it.