![]() ![]() "If your 10-year-old grandson opens a lemonade stand and clears $300 for the summer, the kid could keep the money and Grandma can tuck $300 in the Roth," Haug says. If you doubt that a youngster would see the wisdom of locking away his or her earnings for decades, don't worry. ![]() ![]() ![]() If the 10-year-old continues to contribute $500 until 59, he will have a nest egg of $233,308 at age 60. That compares with $97,084 for a Roth IRA owner who contributes $500 a year from the ages of 22 to 59. According to a study by Haug and co-author Adrienne Cichelli, a child who contributes $500 a year for just nine years from the ages of 10 to 18 will accumulate $111,982 by the time he reaches 60, assuming an average annual return of 7.2%. Indeed, those early contributions can pay off big time, says Mark Haug, a teaching fellow at the University of Kansas's business school. "Roth IRAs can be a fabulous tax-free growth opportunity for grandchildren because they are investing early and investing young," says James Lange, author of Retire Secure!: Pay Taxes Later (Wiley, $25). To help your grandkids build a nest egg with a Roth IRA, they need earned income, whether it's money from raking leaves or a stint as a lifeguard. Thanks to the power of compounded returns, she'll be thinking of you with great affection when she retires. She can put her earnings into the Roth - or she can keep the cash and you can make contributions for her. Perhaps your 12-year-old granddaughter earns money babysitting for the neighbor's children. ![]()
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