Young workers who are under 18 may not be able to open an account on their own. As such, parents may need to assist with this setting up a regular taxable account for them, Steffen said.
A student willing to start investing over a long-term time horizon may want to consider an individual retirement account, or IRA, that takes pre-tax investments.
Or they can consider a Roth IRA, which will allow them to invest post-tax dollars towards those long-term goals.
“A Roth isn’t going to give them a deduction today, but that’s OK, because the deduction isn’t worth that much to them” at the salary they are earning, Steffen said. “But they’ll be able to start building tax-free income for later in life when they’ll presumably be in a much higher bracket than they are in right now.”
When in doubt, parents may want to turn to an investment professional with whom they already have a relationship for guidance.
“It’s pretty easy to open a really small account where the parents have an investment relationship,” said LaPlante at Citizens Bank Private Wealth Management. “When the time comes and the children own all the assets, they’re not going to be completely green and inexperienced.”