Sure can. "I do that myself," says Karen Field, senior manager of compensation and benefits for KPMG Peat Marwick. The only caveat is that the payment can't be a gift or an allowance. They have to be an honest wage. Field suggests that you ask a neighborhood kid what he or she would charge for the work, make a note of that wage and pay your kids the same.

If you're ever audited, paperwork will matter. So pay by check, not in cash. Field prepared W-4 forms for her children so they could specify what should be taken for tax withholding (with child workers, the answer is usually zero). They don't earn enough to file tax returns but she files them anyway, on the theory that "if you're doing something different it's safer to have forms." No Social Security tax is due.

Youngsters with wages should choose a Roth IRA, where the money can accumulate tax-exempt. Roths are available at banks or mutual funds, depending on how you want to invest. If your child needs his or her earnings for expenses, you can fund the child's IRA as a gift - contributing up to $2,000 or the total the child earned that year, whichever is less.