Yes, you can open a Roth IRA for your child, but your child must have earned income

A child can own a Roth IRA at any age, but there is one hard requirement: the child must have earned income from work. This means money they received from a job, self-employment, modeling, acting, or other work — not allowance, gifts, or investment returns. The amount they can contribute to the Roth IRA cannot exceed the amount they actually earned that year.

You as the parent can open the account and manage it until your child reaches the age of majority (usually 18 or 21, depending on your state). You control the money and the investment choices. Your child becomes the sole owner once they reach that age. The account itself belongs to your child from day one, even though you manage it.

The main reason parents open Roth IRAs for children is the decades of tax-free growth. A 14-year-old with $2,000 in a Roth IRA has 50+ years before retirement. That money compounds without ever being taxed on the gains. For a child, this is often a more powerful tool than for an adult.

Key Takeaways

  • Your child must have earned income from work to open a Roth IRA; the contribution limit cannot exceed what they earned that year.
  • You can contribute money on your child's behalf, but only up to the amount of their earned income and the annual contribution limit.
  • As the parent, you manage the account until your child reaches the age of majority, at which point they take full control.
  • The contribution limit for 2024 is $7,000 per year for anyone under 50, but your child's limit is capped at their actual earned income if it is lower.
  • Common sources of earned income for children include part-time jobs, summer work, babysitting, lawn care, and modeling or acting.

What counts as earned income for your child

Earned income is money your child receives for performing work. W-2 wages from an employer are the clearest example: a teenager working at a retail store or restaurant receives a W-2 at the end of the year showing their wages. That amount is their earned income for Roth IRA purposes.

Self-employment income also counts. If your child mows lawns, babysits, does freelance writing, or sells items they made, the net profit from that work (revenue minus business expenses) is earned income. Your child should keep records of what they earned and what they spent on supplies or materials.

Money that does not count includes allowance, gifts from relatives, investment income, interest from a savings account, or money from selling items they already owned. Modeling and acting income does count, even for very young children, because it is payment for work performed.

If your child has no earned income in a given year, you cannot contribute to their Roth IRA that year. The contribution limit is the lesser of the annual limit ($7,000 for 2024) or the total earned income they received.

How much you can contribute each year

The annual contribution limit for a Roth IRA is set by the IRS and changes occasionally. For 2024, the limit is $7,000 per year for anyone under age 50. However, your child's limit is capped at their actual earned income for that year.

If your child earned $3,000 in 2024, the maximum Roth IRA contribution for that year is $3,000, not $7,000. If they earned $8,000, they can contribute up to $7,000 (the annual limit). If they earned $500, they can contribute up to $500.

You can contribute the money yourself. You do not have to wait for your child to save it. Many parents contribute on behalf of their child using money from the family budget, as long as the child's earned income supports the contribution amount. The IRS cares about the earned income existing; it does not care where the actual dollars in the account came from.

Contributions must be made by the tax filing important date for that year, usually April 15 of the following year. For example, 2024 contributions can be made until April 15, 2025.

Opening and managing the account before your child turns 18

You will need to open a custodial Roth IRA in your child's name. Most major brokerages offer these: Fidelity, Vanguard, Charles Schwab, and others. You will be listed as the custodian, and your child will be the account owner.

To open the account, you will need your child's Social Security number, their date of birth, and basic information about them. You will also need to provide your own information as the custodian. The brokerage will ask you to choose investments for the account — usually mutual funds, index funds, or individual stocks, depending on what the brokerage offers.

As custodian, you make all investment decisions and manage the account until your child reaches the age of majority. You decide what to buy and sell. You receive statements and tax documents. Your child does not have to do anything during this time.

When your child reaches the age of majority (18 or 21, depending on your state), the account automatically converts to a regular Roth IRA in their name. You no longer have control. They become the sole decision-maker. Some brokerages notify you when this transition is coming; others do not, so mark your calendar.

Tax reporting and your child's tax return

Contributions to a Roth IRA are made with after-tax money, so they do not reduce your child's taxable income. However, if your child has earned income, they may be required to file a tax return depending on how much they earned.

For 2024, a dependent child with only W-2 wages must file a return if their gross income is more than $14,600. If they have self-employment income, the threshold is lower. Your tax software or a tax professional can tell you whether your child needs to file.

If your child does file a return, the Roth IRA contribution does not appear on it as a deduction. Roth contributions are not tax-deductible. The return straightforward reports their earned income and any taxes withheld. The Roth IRA contribution is a separate financial decision.

You will receive a Form 5498-SA from the brokerage each year showing the contributions made to the account. Keep this for your records. You do not file it with your tax return, but it documents what was contributed.

Withdrawals and the five-year rule

One major advantage of a Roth IRA is that contributions (the money you put in) can be withdrawn at any time, tax-free and penalty-free. If you contributed $2,000 and the account grew to $2,500, you can withdraw the $2,000 contribution anytime without consequence.

Earnings (the growth) are different. Earnings cannot be withdrawn before age 59½ without paying income tax and a 10% penalty — with some exceptions. One exception is if your child has a financial hardship, such as a first-time home purchase or medical expenses. Another is if they become disabled. The rules are complex, so consult a tax professional if you think an early withdrawal might explore.

There is also a five-year rule: to withdraw earnings tax-free, the account must have been open for at least five tax years. This rule applies separately to each Roth IRA your child owns. If you open a Roth IRA for your child at age 10, by age 15 the five-year period has passed and they can withdraw earnings (subject to the age 59½ rule and exceptions).

Why a Roth IRA for a child makes sense

A child has the most powerful asset in investing: time. A 12-year-old who contributes $2,000 per year for five years (ages 12 to 16) will have $10,000 in the account. If that money grows at an average of 7% per year, by age 65 it will be worth roughly $1.2 million — all tax-free. An adult who starts at 35 cannot achieve the same result with the same contribution.

A Roth IRA also teaches your child about saving and investing. They see their name on account statements. They learn that work produces income, and income can be invested for the future. They understand compound growth in a concrete way.

For your child, a Roth IRA is often better than a regular IRA because withdrawals in retirement will be tax-free. They will not have to worry about required minimum distributions or paying tax on the money they withdraw. This is especially valuable if your child's income is likely to be high in retirement.

Frequently Asked Questions

Can I open a Roth IRA for my child if they do not have a job?

No. Your child must have earned income from work. Allowance, gifts, or investment returns do not count. If your child is interested in a Roth IRA, consider helping them find work — even a small job like babysitting or lawn care creates earned income and opens the door to retirement saving.

What if my child earns money but does not want to contribute to a Roth IRA?

That is fine. Contributing to a Roth IRA is optional. Your child can spend or save their earnings however they choose. You cannot force them to save for retirement, and the account belongs to them, not you. If they change their mind later, they can open one at any age as long as they have earned income.

Can I contribute more than my child earned if I use my own money?

No. The contribution limit is capped at your child's actual earned income for that year, regardless of where the money comes from. If your child earned $3,000, you can contribute up to $3,000 even if you have $10,000 to invest. The IRS enforces this limit strictly.

What happens to the Roth IRA when my child turns 18?

The account converts from a custodial Roth IRA to a regular Roth IRA in your child's name. You lose control and can no longer make decisions about the account. Your child becomes the sole owner and can withdraw, invest, or manage it however they choose. Some brokerages notify you when this happens; others do not.

Can I use my child's Roth IRA as an emergency fund?

Technically, yes — you can withdraw contributions anytime without penalty. However, this defeats the purpose of long-term retirement saving. If you need emergency money, it is better to use a separate savings account. A Roth IRA is designed for retirement, and withdrawing from it early means less growth over decades.