Kids IRA

When my child was in 5th grade she came home with an assignment to write a letter asking her parents to pay her for tasks done around the house.

"Hmmm... Sounds like an interesting assignment but you're not getting paid for it," I answered half annoyed that a teacher dare suggest that I start paying my kids, but also impressed that someone had finally assigned something to do with money.

Next, she came home with, "I have to research what college I will go to, what work I will do, and what car I will buy. I'm going to Harvard and I will be an author."

"Hmmm... You might need an additional job as well -- to pay off that school loan," I grinned as I had some knowledge of author salaries.

Weeks later she enthusiastically told me, "Mom, you need to get an IRA."

Ok, that was the last straw! Who's been talking to my daughter?

I've told this story to many friends except, I usually begin, with, "My 5th grader told me I needed an IRA!" I watch their jaw drop that a 5th grader is even thinking about finances, "How does she know about that?"
"Thank her English teacher," I reply. (Yep, it wasn't even a math class assignment!)

Well this class of my daughter's was a rare case! While we all expect our children to be financially responsible, there is no class for it in the younger school grades. Did you know some colleges do not even require an economics or accounting class to graduate? We hear a lot about our literacy rate across the nation but how about our financial literacy? How would the nation change if every child had a Roth IRA?

Being self-employed as a self-published author, I was already very familiar with taxes as well as the requirement for "earned income" to contribute to a Roth IRA. In my networking groups, I heard members speak of hiring their children, which lead to my taking the dive into the IRS Publications to learn how establishing a Roth IRA for kids was legally accomplished. The result was the answers to three major questions:

1. Can small jobs count as earned income for the purpose of contributing to a Roth IRA for kids?
2. What are the requirements for a self-employed parent to hire their child?
3. What are the requirements for parents to make their kids "household employees"?