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

A Roth IRA for a minor is a real account that works the same way as an adult's Roth IRA — money grows tax-free and withdrawals in retirement are tax-free. The catch is that your child cannot open one without earned income. Earned income means money your child received for work: a W-2 job, self-employment, modeling, acting, or babysitting they were paid for. It does not include allowance, gifts, or investment returns.

The amount your child can contribute each year is limited to whichever is smaller: the annual Roth IRA contribution limit (which changes yearly) or the total earned income your child made that year. If your 12-year-old earned $1,500 from a summer job, they can contribute up to $1,500 to a Roth IRA that year, not more.

You will need to open the account in your child's name, but as the parent or guardian, you will control it until your child reaches the age of majority in your state (usually 18 or 21). Your child's Social Security number is required to open the account.

Key Takeaways

  • Your child must have earned income from work to open a Roth IRA; allowance and gifts do not count.
  • The contribution limit each year is the smaller of the annual IRA limit or your child's total earned income for that year.
  • You open the account as a custodial Roth IRA in your child's name, and you manage it until they reach adulthood.
  • Money in a Roth IRA grows tax-free and can be withdrawn tax-free in retirement, making it a powerful long-term savings tool for young workers.
  • Most major banks and brokerages offer custodial Roth IRAs, though some have minimum deposit requirements or age restrictions.

How a custodial Roth IRA works

A custodial Roth IRA is an account held in your child's name with you as the custodian. You make the decisions about where the money is invested and when contributions are made. Your child's name and Social Security number are on the account, and the money legally belongs to your child — you cannot use it for yourself.

When your child turns 18 or 21 (depending on your state), the account converts to a standard Roth IRA in their name alone, and they take over control. At that point, they can manage it themselves, move it to a different bank or brokerage, or change how it is invested.

The tax benefits are the same as a regular Roth IRA: contributions are made with after-tax money (money you have already paid income tax on), but the account grows tax-free, and your child pays no tax on withdrawals in retirement. This is especially powerful for young workers because the money has decades to grow before retirement.

Where to open a custodial Roth IRA

Most major banks and brokerages offer custodial Roth IRAs. Fidelity, Vanguard, Charles Schwab, and E-Trade all have them. Many local banks and credit unions do as well. Call ahead or check the website to confirm they offer custodial accounts for minors, because not all do.

Some institutions have minimum deposit requirements — often $500 to $1,000 — so if your child's earned income is small, check whether the brokerage will let you open an account with less. A few brokerages have no minimums. You will need your child's Social Security number and your own identification to open the account.

Once the account is open, you can contribute money from your own funds if you choose. The contribution must come from your pocket, but it counts toward your child's annual limit. For example, if your child earned $2,000 and you contribute $1,500 of your own money, your child has used $1,500 of their $2,000 limit.

Contribution limits and how much you can add each year

The annual Roth IRA contribution limit changes yearly. For 2024, the limit is $7,000 for most people, but your child's limit is capped at their earned income for the year. If your child earned $3,000, they can contribute no more than $3,000, even if the general limit is higher.

You can contribute the money yourself using your own funds. Many parents do this to help their child build retirement savings without the child having to spend their own earnings. The money still counts toward your child's annual limit, so you cannot contribute more than they earned.

Contributions can be made anytime during the year or up until the tax filing important date the following year (usually April 15). You do not have to contribute the full amount your child earned — you can contribute less or nothing at all. It is entirely up to you.

Tax implications for your child

Contributions to a Roth IRA are made with after-tax money, so your child does not get a tax deduction. However, the money grows tax-free inside the account, and withdrawals in retirement are completely tax-free. This is the main advantage of a Roth over a traditional IRA.

Your child will not owe taxes on the growth inside the account, and you will not owe taxes on it either. When your child reaches retirement age (59½ or older), they can withdraw the money with no tax bill. If they withdraw money before retirement age, they may owe taxes and penalties on the earnings, though contributions can usually be withdrawn penalty-free.

Opening a Roth IRA does not affect your taxes or your child's taxes in the year it is opened. It is straightforward a savings account with special tax rules for retirement.

What happens when your child turns 18 or 21

When your child reaches the age of majority in your state, the custodial account automatically becomes a standard Roth IRA in their name. You no longer have control, and your child can manage it however they want. They can leave it where it is, move it to a different bank or brokerage, change the investments, or withdraw money (subject to the rules about early withdrawal penalties).

Some institutions require you to formally transfer control or sign paperwork, so contact the brokerage when your child is close to the age of majority to find out what steps are needed. Most make the transition automatic, but it is worth confirming.

Why a Roth IRA for a young worker makes sense

A Roth IRA is one of the most powerful retirement savings tools available to young people because of time and compound growth. If your 14-year-old contributes $2,000 and never touches it, that money has 50+ years to grow before retirement. Even modest growth compounds dramatically over that span.

A Roth is also more flexible than a traditional IRA. Your child can withdraw contributions (not earnings) penalty-free if they need the money, though this defeats the purpose of saving for retirement. Still, knowing the money is accessible in a true emergency can make it easier to commit to saving.

For young workers with low income, a Roth is usually better than a traditional IRA because their tax rate is already low. Saving the tax deduction for later years when they earn more money makes more financial sense.

Frequently Asked Questions

Does my child need a job to open a Roth IRA?

Yes, your child must have earned income from work. This includes W-2 jobs, self-employment (like freelance work or a small business), modeling, acting, or paid household work. Allowance, gifts, and investment returns do not count as earned income.

Can I contribute money to my child's Roth IRA if they do not want to?

You can contribute money, but your child must have earned income to justify the contribution. The contribution limit is tied to their earned income, not your willingness to fund it. If your child earned $1,500, you can contribute up to $1,500 of your own money, but not more.

What if my child wants to withdraw the money before retirement?

Contributions can be withdrawn anytime with no penalty or tax. Earnings withdrawn before age 59½ may be subject to taxes and a 10% penalty, though some exceptions exist (like withdrawals for a first home purchase, up to $10,000 lifetime). It is best to treat the account as long-term savings.

Can I open a Roth IRA for my child if they have no income?

No. Earned income is required. If your child has not worked, they cannot open a Roth IRA. However, if they start a small job or side work, you can open one when ready once they have income.

What happens if I contribute more than my child earned?

The IRS will assess a penalty on the excess contribution. To avoid this, keep careful records of your child's earned income and do not contribute more than that amount in any given year. If you make a mistake, you can withdraw the excess and the earnings on it before the tax filing important date to avoid the penalty.