Penny jars and coin sorters are all well and good, but if you really want to jump-start your child's savings habit, you may want to think bigger. Think Roth IRA, in fact.
A child who has a job and earns income is just as eligible as an adult for a Roth IRA, which allows users to contribute after-tax money and receive tax-free growth and distributions.
Both adult and child Roth IRA accounts have to follow the same rules about annual contribution amounts and the like. (The maximum for those under age 50 is the lesser of $5,500 or your annual income.) And for minors, an adult has to open a custodial Roth account, with the adult as custodian and the child as owner, until the child reaches legal adulthood.
Parents who set up an account within those limitations can start a child on the road to financial security without adding any worries about the tax man. They can also create the account as a gift for the child by depositing their own money instead of the child's earnings, provided they do not exceed the amounts the rules allow.
"This is a wonderful learning opportunity for the child to learn about saving for the long term," said Keith Bernhardt, vice president of retirement and college for Fidelity Investments. "The two biggest things for hitting a savings goal are, starting to save early and saving consistently."
Fidelity earlier this month launched a Roth IRA for kids, though other firms offer these accounts as well.