Consider using allowance to start Childhood IRA


"YOU CAN MAKE your child a millionaire," says Family Circle magazine, Feb. 15.

"Let's say you give your 12-year-old weekly chores around the house: cleaning his or her room, taking out the garbage, doing the dishes, washing the car. In exchange, you pay your child $20 a week, or $1,040 a year. But instead of giving the money outright, put it in a Childhood IRA for your son or daughter."

In a Childhood IRA that's invested in good growth mutual funds, and if the funds grow at an average rate of 10 percent annually, the child's IRA will be worth $16,575 in 10 years, the article says. If you don't put in another dime after your child turns 20 and the fund grows at the same 10 percent rate for another 45 years, at age 65 the Childhood IRA will be worth more than $1.2 million.

Should you pay off debt or invest the money in stocks? Financial Planning Perspectives says many planners recommend that people aggressively pay down any debt on which the interest rate runs 10 percent or more. For lower rates, you and your planner should evaluate whether to pay off the debt or use the money for investments or perhaps an emergency fund.

WALL ST. WATCH: "For income-seekers, tax-free municipal bonds are a screaming buy if you're in the higher tax brackets." (Bill Hornbarger, fixed-income strategist)

"When an 'it' stock -- one that captures investors' imaginations -- goes ballistic, conventional analysis becomes pointless. It's all about momentum: Buy first, think later." (Money, March)

"The race to pile up retirement wealth goes not to the swift but to methodical investors who make regular tax-deductible contributions." (Worth, March)

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