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Roth IRAs for Kids - pt 2
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 What Can Parents & Guardians Do to Help Kids Establish Roth IRAs?

Help establish a 529 College Savings Plan for your kid as soon as he or she is born. Since you will pay for this with after-tax money, the account will grow tax free, and can be withdrawn by your kid when he or she begins incurring college expenses -- tax free. Unlike a Roth IRA, the kid does not need earned income to set up a 529 Plan, which is why you -- the parents or guardians -- can set it up for your kid. But this doesn't teach your kid about financial responsibility, compound growth, or provide them the skills to make good investment decisions. That's why Roth IRAs and IRAKids Clubs are important (so please keep reading).

Ask your bank, credit union, financial advisor, or accountant to sponsor and help organize an IRAKids Club, and then help organize educational and fun programs for subsequent meetings.

Help recruit friends of about the same age and maturity as your kid, along with one parent or guardian of each, to form the IRAKids Club. But keep it quite small, perhaps no more than 12 kids (plus adults).

Help contribute to the educational programming at your meetings, perhaps rotating program responsibilities among the children and their respective parents or guardians.

Help your kids find work from which they can derive earned income, by defining jobs they can do at home and the amount they will be paid for completing them. Provide incentives.

Help your kid maintain an ongoing account of earnings, noting dates jobs were performed, the amount earned, and when you paid your kid for doing the work. And if the kids work outside the home, help them learn how to keep track of money earned from those sources.

Help your kid prepare and file an annual income tax return. If both you and your kid need help with this, you – the parent – pay the accountant’s charge for helping you. Let the kid invest what he or she has earned, after taxes.

Help your kid establish his or her Roth IRA account when he/she has earned enough to open an account. This will have to be a custodial account if your kid is under the age of 18 or 21 (or up to 25), depending on the state.

Help your kid – or seek help for your kid – to make wise investment decisions for funds in his/her Roth IRA.

Provide incentives and rewards. For example, give your kid on his/her birthday $10 for each year old he/she is. That’s not earned income, but it can be spending money which prevents an equal amount being removed from the kid’s earnings, which can be invested in his/her Roth.

Provides reward and incentives: At the time your kid makes his/her annual investment in his/her Roth IRA, match that investment up to a specified number of dollars (say $120) – to be determined by you and your kid, as an incentive. (Hopefully, your kid invests 2, 3 or more times the amount of your incentive.) This is NOT earned income, and cannot be invested, but it can be spending money that rewards the kid for earning an equal amount and investing it in his or her Roth.

Watch business programs on TV with your kid. Talk about companies, what they do, where they are located, how many persons they employ. Help them to do basic research about a company using Internet resources – many of which are excellent.

If you find other ways to help and incentivize your kid, please let us know what they are. If they are duplicable by other parents or guardians, we’ll add your suggestions here. And thank you. You – the parent or guardian – are the key to helping your kid get an early start in earning for, opening, and continuing to invest in, a Roth IRA. This is one of the most important ways you can help your kid prepare for the future.

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