Start A Roth IRA For Your Children
We do not typically think of setting up a Roth IRA for our children, but it can be a great way to start saving money for their future.
You can “hire” your children to do chores, and put those earnings into a Roth IRA. Set up a chore schedule for your child and document his or her wages and responsibilities. Instead of giving out an allowance, develop a pay scale. Calculate their earnings and provide your child with a W-2 form at the end of the year.
If your child has a job, they will already get a W-2 form for their earnings. As long as they have earned income, they can open a Roth IRA account. You will probably have to go with them, and open up a custodial account. Putting your child’s earnings into a Roth IRA will give them a good sense of the importance of saving. Get them started as soon as you can, so they can keep adding to their account. The earnings put into a Roth IRA are tax free.
Tell family members your child has their own Roth IRA. Contributions to their IRA can be a great gift. As parents, match any contributions your child makes to their Roth IRA. They will see how quickly their money can grow. A Roth IRA is something they will have for the rest of their lives. When they are ready to retire, they will have a very nice nest egg saved up.
Teaching your children the importance of saving should be a part of your job. You want to make sure they will always have enough money to get by. A Roth IRA a good place to start.