Summer jobs are a perennial aspect of the American workforce. It’s a time when teenagers are filling out applications and, in many cases, earning wages of their own for the first time. But some of what we’ve become accustomed to may be changing.

In May, leading into the summer months, 33.2% of working-age teenagers (16-19) were part of the workforce. The hospitality industry, including restaurants and hotels, is an industry still struggling in the wake of COVID-19. They have faced particular challenges in staffing and have turned to hiring younger employees in particular.1

How might that change as many of these employees return to high school and college this fall? While many may shift hours, others might need to shift focus to classes full time. This might turn the current teenage wage-land into a teenage wasteland and leave restaurants and hotels struggling to cover shifts.

There is another aspect to our young teens working that should be addressed.  Starting a Roth IRA.  The earlier the better is the rule when it comes to retirement.  If a 19-year-old were able to max out their Roth IRA for one year, that would be $6,000.  If that $6,000 were to average 8% a year over 40 years, the account would grow $147,143.58.  Just from one year of contribution early in life there is great start for retirement.  If that contribution was at age 29 and accumulated for only 30 years, the amount would be $66,121.67.  Getting our young people to understand the benefit of starting savings early is paramount to their success. 

Are the teens in your household and extended family working? Remind them that their money is about more than that first car or even paying for college; the day you start working can also be the day you start your financial strategy, from starting their career to retirement. If they have questions about that, we’d be happy to talk you both through these first steps.

This is a hypothetical example and is not representative of any specific investment.  Your results may vary.

A Roth IRA offers tax deferral on any earnings in the account.  Qualified withdrawals of earnings from the account are tax-free.  Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax.  Limitations and restrictions may apply. 

1., July 26, 2021