Considering IRAs for Children
— -- This tip is for teens that had after school or summer jobs last year, flipping burgers, babysitting, and the like.
Why not start an individual retirement account and stick some of your earnings into a great tax shelter?
"You say you've already spent your money or, if not, the last thing you'd do is salt it away for retirement 40 or 50 years down the road. Well, I don't blame you, but try this: Ask your parents or grandparents to help fund your IRA," said Kevin McCormally of Kiplinger Personal Finance magazine.
McCormally said that while the law stipulates that you must have earnings in an IRA, it doesn't necessarily have to be your own money.
"Here's a tactic that might work: Remind your folks that by claiming you as a dependent, they save better than $750 in taxes if they're in the 25 percent bracket," he said.
And tell them if you put that $750 into an IRA, it would grow to almost $90,000 in 50 years, assuming a 10 percent annual rate of return. You have until April 15 of this year to set up an IRA for last year.
Click here for interactive tax explainers and calculators
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