CNNMoney:
1. A Roth IRA - Best way to make your kid a millionaire
Price: As low as $100 to open
Who it’s for: Any child who has earned income
What it’s about: You can invest as much as your child makes, up to $4,000 a year. Tax-free compounding over time produces a powerful payoff: A $1,500 yearly contribution will be worth nearly a million bucks in 50 years, assuming an 8 percent average annual return.
Why it works: Few teens are likely to be excited about saving their hard-earned babysitting money for retirement. So offer to match what they make in an IRA. Want another way to ramp up their enthusiasm? Slip a little cash into the gift card too.
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2. Alexander, Who Used to Be Rich Last Sunday
Price: $6.99 at most bookstores
Who it’s for: Four- to eight-year-olds
What it’s about: In this charming story by Judith Viorst, Alexander gets a gift of $1 from his grandparents. He has lofty plans to save the money for a big-ticket item but instead blows it all in the face of life’s temptations and regrets it.
Why it works: By age four, kids are old enough to grasp the basic concepts of saving and spending, but they’re not likely to sit still for a lecture on the topic.
“When children are engaged by a story and see a character’s life turn this way and that, they’ll learn by example,” says Margaret McKeown, a senior scientist at the Learning Research and Development Center at the University of Pittsburgh.
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3. Payday - Best board game for learning money-management skills
Price: $14.99 at most toy retailers
Who it’s for: Preteens
What it’s about: Created in 1975, this game sends each player down a 31-day path to earn and spend money - working, investing, shopping, paying bills, even gambling occasionally. The player with the most cash left at the end wins.
Why it works: Recent research has shown that, developmentally, kids are most receptive to learning financial concepts before they hit high school. But that doesn’t mean they’re interested. When they’re having fun playing a board game, though, they won’t even know they’re getting a tutorial on budgeting, borrowing with interest, saving - and the perils of squandering their money.
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4. The Sims 2: Open for Business - Best for the aspiring entrepreneur
Price: $70 ($40 for the basic Sims game; $30 for the add-on) at software outlets
Who it’s for: Teenagers
What it’s about: This add-on to the popular Sims series lets players create and manage a business, such as a restaurant, boutique or spa. Teens learn the challenges of entrepreneurship, from hiring and firing to devising an effective marketing strategy.
Why it works: You can tell your teen until you’re hoarse that being the boss is harder than it seems and never get through. After playing this game, she’ll be telling you.
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5. Contribution to a 529 Plan - Best gift from Grandma
Price: Typically $25 to $250 for the initial investment
Who it’s for: Kids up to 18
What it’s about: Move over, savings bonds: 529 accounts have the edge for grandparents eager to help pay Junior’s college tuition. Advantages include tax-deferred growth on earnings, tax-free withdrawals and, in many states, a deduction for contributions. Compare plan details at savingforcollege.com.
Why it works: While kids may not get excited about this gift now, just wait a few years. When they owe thousands less in student loans than their college buddies do, you’re sure to get plenty of appreciation.
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