Shortcut Navigation:

Question for the Money Doctors

Question submitted on May 24, 2016.


My daughter is 14 and has approximately $1000 in cash from jobs (pet-sitting, baby-sitting, etc.) and birthday/holiday gifts.

She would like to invest it, ostensibly for college and/or her retirement.

How should I begin researching to find the best vehicle for either college savings or for longer-term like her retirement? What aspects should we consider? I would prefer to not impact her future ability to qualify for financial aid when she reaches college age.



At 14, and assuming the income is earned and reported on her tax return as eligible compensation (such as wages reportable on a W-2), a retirement savings account would be an option. Given she most likely has no other income and therefore, is in a low tax bracket, a Roth IRA could work if she would prefer to save/invest the funds for retirement. 

The good news is that your daughter can take her $1000 and open a college savings account.  Research your state’s 529 College Savings Plan.  These plans offer a variety of investments and in some states there are tax incentives to save.   Distributions are tax-free when used for qualified higher education expenses such as tuition, fees, room, and board.  

 Even if she opens a 529 account in her name, the balance will be counted as a parental asset on the Free Application for Federal Student Aid (FAFSA).  This is favorable to your daughter because parental assets are weighed far less heavily when preparing financial aid calculations.

 The $1000 initial deposit would be a jumpstart to greater savings.  Your daughter can continue to contribute and other family members are also eligible to make deposits on her behalf.

 Also, consider working with a CPA/PFS in your area if you need assistance with this process from a  planning perspective.

For additional information visit