Problem: We hear a lot about the benefits of Individual Retirement Accounts. Is it a good idea for a child to open up an IRA?

        Strategy: Yes, it's a very good idea to establish an IRA on behalf of a child.

        Crystal Faulkner, accountant and partner with Cooney Faulkner & Stevens, says that not every child can open up one, however.

        Kids must have earnings from a job to contribute to an IRA — even if the income is from baby sitting or lawn mowing. A Roth IRA especially is a great tax shelter and investment tool for your children to learn the significance of savings and investing.

        For example, if you invest $800 in your child's Roth IRA (assuming your child earned that much in 2000), it will grow to more that $90,000 over the five decades between now and when your child retires (assuming an average 10 percent annual return).

        And because you are investing in a Roth, the money will be tax-free to your child when it is distributed.

        What if your kids have spent the money they earned? Parents and other relatives can contribute money on behalf of a child as long as the contribution does not exceed what the child earned during the year up to a maximum of $2,000. The law says you must have earnings to have an IRA. However, it does not have to be the actual dollars earned.

        In order to contribute to a Roth for 2000, the IRA must be funded by April 16.

        Children should be taught the concepts of savings and investing as soon as they understand the importance of money. Once you get kids involved in savings and investing on their own, there's a good chance they'll continue throughout their life.

        Readers: Consider Savvy Strategies as general information only and seek the help of professionals because circumstances might vary.

        Planners: Share your unique strategies or new approaches with the Enquirer and our readers. Send your Savvy Strategies to Amy Higgins, 312 Elm St., Cincinnati, OH 45202 or e-mail ahiggins@enquirer.com.

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