GETTING STARTED An IRA Owner's Manual Max Out Your 401(k) What to Ask Before Buying an Annuity How Much Will Social Security Pay You? MORE... Sponsored By: RETIREMENT TOOLS Am I saving enough for retirement? How much will Social Security provide after retirement? The power of boosting 401(k) contributions Recent Columns An Enterprising 7-Year-Old - Feb. 3, 2005 Investing Resources for Teens - Jan. 27, 2005 Establish Money Rules up Front - Jan. 20, 2005 Save Now to Avoid Financial Aid Crunch - Jan. 13, 2005 Roth IRA Rules for Kids - Jan. 6, 2005 Parents Can't Tap Child's Custodial Account - Dec. 30, 2004 MORE ... MONEY SMART KIDS E-MAIL   Sign Up   Now you can have Money Smart Kids delivered to your inbox every Thursday. Sign up now.

MONEY-SMART KIDS
An Enterprising 7-Year-Old
by Janet Bodnar

My 7-year-old son has been very envious of his older sister's bigger allowance and cat-sitting money, so he took the initiative to make some money of his own. I thought you'd enjoy seeing his marketing pitch:

Either way, he'll make lots of clams!

Setting up a Child's Roth IRA

Can you give me the names of brokers or mutual funds that will open Roth IRAs for minors? Most seem to say that kids need to be 18.

Many readers run into the same problem. In fact, when Kiplinger's surveyed financial institutions to see if they would set up IRAs for minors, some of the telephone representatives told us, "That's illegal," or "I've never heard of such a thing."

If that should happen to you, ask the phone rep to check further. IRAs for kids are not illegal -- IRS regulations specifically say they're okay. Some big-time IRA sponsors do have reservations about opening retirement accounts for children, because minors can't legally enter into binding contracts. The firms' lawyers worry that if the investments don't do well, minors might complain about poor performance.

But a growing number of mutual fund families and many big brokerage firms are willing to open IRAs for kids -- although some require an adult to co-sign the paperwork. Among the firms happy to open IRAs for youngsters: Merrill Lynch, Charles Schwab and T.D. Waterhouse brokerages, and the American Century, T. Rowe Price, Strong and Vanguard mutual fund families.

As I noted in a recent column, setting up a Roth for a minor might require some discussion with a broker or customer service rep, so it's best done over the phone or in person rather than on the Web.

Keep in mind that any financial firm will open a Roth IRA once a child turns 18 -- and that's when kids start to earn real money from summer, part-time or full-time jobs.