Posted on July 12, 2006 at 16:51:38:
Summer jobs are good learning experiences for kids, no matter how much or how little they earn.
One plus: most youngsters can avoid income tax withholding from their paychecks, as long as they didn’t owe any tax last year and don’t expect to owe any for this year. This assumes that the students can be claimed as dependents on their parents’ returns, that unearned income is $250 or less and total income does not go over $5,000. If investment income is more than $20, total income must be limited to $800 to qualify.
Another learning experience: how interest compounding makes money grow. They may not be thinking about retirement right now, but that summer job offers a super opportunity. Start a Roth IRA for the child with as much as 100 percent of his or her earnings, up to $4,000. Earning 6 percent a year, that $4,000 can grow to $73,000 by the time the child reaches 65.