Yes, you can open a Roth IRA for your child, but only if they have earned income
A child can have a Roth IRA in their own name as long as they earned money during the year — from a job, self-employment, modeling, or other work. The account belongs to the child, not the parent, even though a parent typically manages it until the child turns 18 or 21 (depending on state law). The child's earned income for the year sets the maximum you can contribute; you cannot put in more than they earned.
The IRS does not set a minimum age. A 7-year-old with a paper route can have a Roth IRA. What matters is the earned income requirement — the child must have actually worked and received a W-2 or 1099 form, or you must have records of self-employment income if they worked for your business.
If your child has no earned income, a Roth IRA is not an option. A regular savings account or a 529 education savings plan would be the alternative.
Key Takeaways
- Your child must have earned income in the year you contribute — W-2 wages, self-employment income, or documented work for a family business all count.
- The maximum contribution is the lesser of $7,000 (for 2024) or the total earned income your child received that year.
- A parent or guardian opens and manages the account as a custodian until the child reaches the age of majority in your state.
- Money in a child's Roth IRA can be withdrawn penalty-free at any time if needed, though earnings cannot be touched before age 59½ without tax consequences.
- Most brokerages require a parent to open the account; some have minimum deposit requirements ranging from $0 to $2,500.
How earned income works for children
Earned income means money your child received for work — not allowance, gifts, or investment returns. Common sources include W-2 wages from a job at a store, restaurant, or office; self-employment income from babysitting, lawn care, or freelance work; or wages paid by a parent's business if the work is real and the pay is reasonable for the task.
The IRS scrutinizes parent-owned business income closely. If you pay your child $10,000 to "help" in your business but they do not actually work, the IRS can disallow the deduction and the income. The work must be age-appropriate, documented, and paid at a rate you would pay an unrelated person. A 12-year-old filing papers for $15 per hour is defensible; a 12-year-old earning $50 per hour for vague "consulting" is not.
You will need proof of the income: a W-2 from an employer, a 1099 if your child is self-employed, or records you keep if they work for your business (hours worked, tasks completed, dates paid). The child must file a tax return for the year if their income exceeds the standard deduction, even if no tax is owed.
Contribution limits and how much you can put in
The annual contribution limit for 2024 is $7,000, or the child's total earned income for the year — whichever is smaller. If your 14-year-old earned $3,500 from a summer job, you can contribute up to $3,500 to their Roth IRA. If they earned $10,000, you can contribute $7,000 (the annual cap). If they earned $500, you can contribute $500.
The contribution limit changes each year based on inflation. Check the IRS website or your brokerage for the current year's limit before you contribute.
You can contribute the money yourself using your own funds — the child does not have to hand over their paycheck. Many parents do this to encourage saving. The account still belongs to the child and counts as their asset for financial aid purposes, but the parent controls it until the child reaches adulthood.
Opening a custodial Roth IRA
You open a custodial Roth IRA through a brokerage — Fidelity, Vanguard, Charles Schwab, and most other major firms offer them. The account is registered in the child's name with you listed as custodian. You provide the child's Social Security number, date of birth, and address.
Some brokerages have no minimum deposit; others require $500 to $2,500 to open. Once open, you can contribute as little as $50 per month if you set up automatic transfers. The account can hold stocks, bonds, mutual funds, or money market funds depending on what the brokerage offers.
The process takes 10 to 20 minutes online. You will need the child's Social Security number and your own identification. The account is yours to manage until the child reaches 18 or 21 (depending on your state's age of majority), at which point they can take control or you can transfer custodianship.
Tax treatment and withdrawal rules
Money contributed to a Roth IRA can be withdrawn at any time without penalty or tax — that is one of the Roth's main advantages for children. If your child needs the money for an emergency, they can take it out. The earnings (investment gains) are different: earnings cannot be withdrawn before age 59½ without owing income tax and a 10% penalty, with narrow exceptions for first-time home purchases or education expenses.
Because the child likely has little or no tax liability, the contribution itself may not create a tax bill. If they earned $3,500 and you contributed $3,500 to their Roth, they may owe no federal income tax for the year. The contribution does not reduce their taxable income the way a traditional IRA contribution does — it is made with after-tax money.
When the child turns 18 or 21, they can take over the account themselves. The money stays in the Roth and continues to grow tax-free. If they never touch it, it can compound for 40+ years before retirement.
Comparing a Roth IRA to other savings options
A Roth IRA is not the only way to save for a child. A 529 education savings plan is tax-free for college expenses and does not require earned income. A regular custodial savings account has no contribution limits and no withdrawal restrictions. A Coverdell ESA (education savings account) is similar to a 529 but smaller ($2,000 per year).
The Roth IRA is best if your child has earned income and you want to encourage long-term retirement savings. The money is flexible — it can be used for college, a car, or retirement — and it grows tax-free. A 529 is better if your only goal is education and you want to save more than $7,000 per year. A regular savings account is simpler if your child has no earned income or you want no restrictions at all.
| Account Type | Requires Earned Income | Annual Limit (2024) | Tax Treatment | Withdrawal Flexibility |
|---|---|---|---|---|
| Roth IRA | Yes | $7,000 or earned income | Tax-free growth; contributions can be withdrawn anytime | High — contributions anytime, earnings at 59½ |
| 529 Plan | No | None (gift tax limits apply) | Tax-free for education; taxed if used for other purposes | Limited to education expenses |
| Custodial Savings Account | No | None | Taxed on interest each year | Complete — any time, any reason |
Frequently Asked Questions
What if my child earned money but did not get a W-2 or 1099?
You can still open a Roth IRA if you have records of the income — a ledger, bank deposits, invoices, or a letter from the person who paid your child. Keep these records in case the IRS asks. If your child worked for your own business, document the hours, tasks, and dates paid.
Can I contribute to my child's Roth IRA if they do not want to?
Yes. The account is in the child's name, but you control it as custodian. Many parents contribute without the child's involvement, especially for young children. The child can take over when they reach adulthood and decide what to do with the money.
Does a Roth IRA affect financial aid for college?
Yes. A custodial Roth IRA counts as the child's asset on the FAFSA and reduces their aid may be able to access. A parent-owned 529 plan has less impact. If financial aid is a concern, talk to a financial aid officer before opening the account.
What happens to the account when my child turns 18?
The account remains open and the money stays invested. You can transfer custodianship to your child, or they can request it. Once they have full control, they can withdraw, invest, or leave it alone. Some brokerages require a signature or a form to transfer control.
Can I open multiple Roth IRAs for my child at different brokerages?
You can open accounts at multiple brokerages, but the total contributions across all accounts cannot exceed the annual limit. If you contribute $4,000 at Fidelity and $3,000 at Vanguard, you have hit the $7,000 cap and cannot contribute more that year.