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Money Monday: Should my teen invest in a taxable brokerage account?

Your idea is a great one. Her future will only grow from there.
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I am a dad, carpenter, writer, and retired software engineer who has been living in Longmont since 2005. I used a few simple but powerful life principles to become wealthy enough to retire at age 30, and went on to start a blog called Mr. Money Mustache that has now reached over 30 million people in the past nine years. Now it’s time to take these ideas to the streets of Longmont, so send in your questions about money and life.

My daughter who is 16 wants to start investing. She has a full-time summer job that earned her lots of income. She will be able to fund her Roth fully and now she wants me to invest the rest. Do you think it’s a good idea to invest in a taxable brokerage account? Thank you — MP

Hello MP,

First of all, congratulations to your daughter, she is off to an unusually early start!

And YES, I think your idea is a great one for a teenager who is probably in a low tax bracket, and thus won’t really benefit from any pre-tax contributions to an IRA. 

Plus, having that money in a taxable brokerage account may be convenient for her throughout her young adult years, for paying for things like college tuition, a car, or a downpayment on a house as appropriate.

So if you can help her set up an account at any brokerage (I happen to use Vanguard and Etrade myself but there are many great options), she can just start buying up shares of a great low-fee index fund (I’m a big fan of Vanguard’s VTI exchange traded fund)  and her bright future will only grow from there. 

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