Monetary Asset Discussion Morphs into Custodial Roth IRA Promotion

Recently, a student captured the imagination of my class. It stemmed from a comparison of Money Market Deposit Account (MMDA) and Certificate of Deposits (CD).  It was suggested that one of these accounts could be very useful for graduation gifts this spring.

One of my students, Phil, asked,  “Mr. Shifrin, what would you do if you unexpectedly received $5,000?”  My response was what he and others expected, “Max out my Roth IRA.”

Phil quickly replied, “ What would you recommend this seventeen-year-old senior do?”

After sharing the disclaimer that I am not qualified to give financial advice, I seized this learning opportunity.

As a group, we began eliminating any current needs such as saving for college, money for a new laptop for the fall, money for transportation needs, family needs, emergency fund, etc.  It was clear Phil wanted to learn how to invest this money.

This allowed me to delve into the benefits of a Custodial Roth IRA :

  • Investing – you can invest the lesser of $5500 or your maximum income earned;
  • Retirement – money taken out in retirement is tax-free;
  • Tax Advantage – you can always take out any money invested, but should keep it invested for at least five years to take full advantage of the tax benefits of a Roth IRA;
  • College – money can be used for qualified college expenses;
  • Housing – up to $10,000  can be used for a downpayment on a house;
  • Roth IRA – becomes a Roth IRA at age 18 in most states.


Utilizing the Rule of 72 (72 divided by the interest rate equals the number of years a balance will double) and the historical stock market return of seven to ten percent, we did the math to show how at age 67 Phil would have a sizable sum of money.


$5000 becomes  $160,000 at 7% a year

(Low end of the historical average and a 10 year doubling period)

Age Balance in Account Age Balance in Account
17 $5,000.00 47 $40,000.00
27 $10,000.00 57 $80,000.00
37 $20,000.00 67 $160,000.00


If he added $25 a month until age 67, he would have $288,090.87 in this account.

Do I believe my students opened a Custodial Roth IRA after class? No, but it might have reinforced my students super power: time and the ability to determine the time value of money. Hopefully, this lesson will encourage each student to utilize this super power in the future.

You can learn more about Custodial Roth IRAs from:


About the blogger: Brett Shifrin has been teaching mathematics for over 25 years. After setting aside class time for students to ask about the economic downfall in 2008 and having students ask questions for 90 minutes, he realized the importance of offering a course. Brett empowers his students to research financial concepts, utilize foundational knowledge, and analyze financial decisions using mathematics. He encourages his students to embrace financial decisions and question any advice that is pushed upon them. Brett is also an avid cyclist and loves spending time with his family in the mountains of Maine hiking, biking, skiing and swimming. You may reach him on Twitter at @brettshfrn.

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