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MONEY-SMART KIDS
Establish Money Rules up Front
by Janet Bodnar

I'm 13 years old and working to become as "money savvy" as I can be. I'm not sure that I agree with some of your tips. First, you recommend that parents match children's savings as an incentive. But that could instill the idea that kids only need to provide for themselves halfway, and they can do whatever they want with the half that parents provide. When children get to high school, for instance, they might expect parents to pay for half of their purchases.

Also, you recommend that kids play financial board games, such as Monopoly. Financial games can give children the false impression that they'll always start out with money. Kids need to learn that it's really up to them to get the ball rolling financially.

Wow. You are already one money-savvy kid, with a unique perspective. Having considered your points, I still think that parents can match a child's savings without raising false hopes.

In your letter you mix together two different things, saving and spending. The match is an incentive to put money aside and is completely optional; parents may choose to offer one or not, and can select the amount.

Gas and clothes are expenses, not savings. Parents should state how much they'll pay for and how much will come out of kids' income, from jobs or allowance. In either case, the key is to set the rules up front.

The same goes for games like Monopoly. As long as parents make it clear that they're games, kids will understand that you don't begin life with money.

Thanks for reminding us that children can take parents quite literally, so we have to be careful to explain what we say.

Finding Roth IRAs for kids

I went to the TD Waterhouse and Vanguard Web sites, which you say are willing to open Roth IRAs for minors. I saw information about custodial accounts but nothing about Roths for kids.

They're not the same thing. A custodial account can be any kind of savings account for a minor; a Roth is a retirement account that can be opened only when a child starts to earn money. Because it's a specialized investment vehicle, it would be better to contact the companies by phone. Call Vanguard at 800-662-7447 and TD Waterhouse at 800-934-4448.