In the SmartMoney 8 January 2007 (updated on that date) article, "Tax Guide: IRAs for kids", Bill Bischoff encourages youngsters to establish Roth IRAs and notes the advantages of Roth IRAs over Traditional IRAs. He suggests some ways to motivate kids to invest, and suggests that related learning experiences will be important to the children for life. For the parents or guardians that are self employed, Bischoff also notes the significant benefits of hiring their children, and the importance of paying "reasonable" wages.
In the Kiplinger.com 6 January 2005 article, "Roth IRA rules for kids" (Money smart kids section), Janice Bodnar states that if a child has earned income, a parent can set up a Roth IRA on behalf of the child and fund the account up to the amount earned by the child. She also presents guidelines for paying a child to work in a home office.
Jeff Schnepper’s article for MSN Money, "The Basics: A Roth IRA for your kids? Yes, you can", discusses hiring your children (as opposed to giving them an allowance) to do defined jobs around the house. Schnepper notes that the U.S. Tax Court has validated a parent with a home business hiring his 7-year-old son to do work in the office. By extension, Schnepper concludes that in a non-business setting, it is possible to hire children at least as young as seven years old. He discusses the extraordinary advantages of hiring your child in both business and non-business settings, and describes the earnings potential of funds invested by children in Roth IRAs. The article probably was written in 2005.
A Motley Fool article, "Investing for your kids: The IRA options", discusses Traditional IRAs, Roth IRAs, and Education IRAs, defining what an IRA is and noting the differences in these three categories. The author notes that “in the eyes of the law” an IRA for a child is slightly different from a custodial account, but, in both cases, the parent/custodian manages the account until the child reaches the age of majority. The date of the article is not given.
The Fairmark Press Tax Guide for Investors website contains an excellent set of articles on Roth IRAs. The fourth article -- "Roth IRAs for minors" -- states that a Roth IRA can be an excellent investment vehicle for kids, and notes that the contribution can be made by parent(s), etc., as long as those contributions do not exceed the child’s earnings. The author notes that a child needs taxable compensation income before he/she can invest in a Roth IRA. The author discusses earned income from a parent’s business, and provides brief guidelines for substantiating related payments to a child. However, the author expresses concern about the taxable nature of payments made by parents or guardians to children for performing household chores. While authors of other articles cited here have not come to the same conclusion, parents should be aware of this interpretation and possible complication. The date of this article is not given.