The Secret to Saving for Retirement: Start Before You're 20 [View all]

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Among the options for those who are younger, a Roth IRA makes sense because of the tax advantages. Once a child earns income, they are eligible to open up an individual retirement account. By making it a Roth IRA, children can get decades of tax-free compounding, giving them the potential to build a meaningful nest egg with little money down.

A traditional pretax IRA, which offers an upfront tax break, is of little or no value to a teenager. A Roth IRA makes sense when your present earnings are likely lower than what you will earn in retirement. Unlike a traditional IRA, contributions to a Roth are made after taxes. Teens are ideal candidates, since most pay very low or no taxes.

Roth IRAs for teens are gaining in popularity. The average age of those with custodial Roth IRAs, where an adult sets up the account with the child as beneficiary, is 13.7 years, Fidelity Investments said. The number of these accounts in June grew 28% year-over-year.

If you’re under 18, you need an adult to act as custodian and control the account. There is some paperwork to transfer it to your name later, typically when you reach 18 or 21, depending on your state.

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