Or in fact--if your child has earned income, you can contribute to an IRA in the child's name, as long as the contribution is less than $2,000 and no more than the child's income. (Take note that teaching your children about delayed gratification is a good thing, but asking teenagers to wait until age 59½ to spend their money would be asking a lot. Be realistic.) The funds grow tax-deferred, there's no withdrawal penalty if the funds are used to pay for "qualified higher education expenses," and if perchance those funds do stay in a tax-deferred account until your child is 59½, think of the compounding!

A child's IRA is similar to a custodial account in that you control the account until your child reaches the age of majority. For more detailed information on IRAs, penalties for early withdrawal, and other regulations, ask your credit union for a brochure.

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