IRAs to help children is a wise financial decision.
Can children have IRAs? There is no minimum age for having an IRA. Due to the power of compound interest, saving tax-free in an IRA from childhood on can provide a huge head start on financial security. Saving $5,500 in an IRA annually from age 14 through 24 and earning 7% per year provides $1.06 million at age 61—even without contributing after age 24!
1. Open an IRA for every child who has earned income. The yearly contribution limit is $5,500 or the amount of the child’s earned income, whichever is less. Any kind of paying work will do: babysitting, waiting tables, and so on. Wages can come from a family business. Note: for a minor child (under age 18 to 21, depending on state law), you will need to set up a “guardian IRA” account. These are offered by many banks and financial institutions.