Can I Open a Roth IRA for My Child?

Yes — if your child has earned income from real work. A custodial Roth IRA (also called a Roth IRA for a minor) is opened by a parent or legal guardian on behalf of a child under the age of majority. The child must have W-2 or 1099 earned income for the year, and the contribution is capped at the smaller of the child's earned income or the 2026 IRA contribution limit of $7,500. The IRS imposes no minimum age — the practical floor is whenever the child starts earning genuine income (often around age 8–12 with informal work like babysitting or lawn care). The long-term math is striking: a $5,000 contribution at age 14, invested in a low-cost index fund returning 7% real, grows to roughly $200,000 by age 65 — entirely tax-free at qualified withdrawal.

The Earned-Income Requirement — What Counts and What Doesn't

The single hard rule: your child must have earned income for the tax year, and the Roth IRA contribution cannot exceed it. This is the same rule that applies to adult Roth IRA contributors (IRC §408A(c)(2)).

What counts as earned income:

• W-2 wages from any employer (a part-time job at a restaurant, retail, etc.).
• 1099-NEC self-employment income from babysitting, lawn care, dog walking, tutoring, snow shoveling, lemonade-stand sales, modeling, acting, athletic earnings, family-business work where the child performs real services.
• Tips reported on Form 4137 or via employer.

What does NOT count:

• Allowance for chores like cleaning their own room or normal household tasks.
• Gifts and birthday/holiday money.
• Investment income (dividends, interest, capital gains).
• Inherited money or trust distributions.
• Social Security survivor benefits.

Documentation matters. If the IRS audits the contribution, the child must be able to substantiate the earned-income claim. For W-2 income, that's easy: the W-2 itself. For self-employment work like babysitting, keep a simple log: dates worked, hours, hourly rate, client names, payments received. A spiral notebook is fine. Filing a Schedule C on the child's tax return (even if no tax is owed) creates an audit trail.

Step-by-Step: Opening a Custodial Roth IRA in 2026

1. Confirm your child has earned income. Even $200 of babysitting income is enough to start. The contribution can be up to that amount.
2. Choose a custodian. Fidelity is the most flexible (no account minimum, no fees, fractional shares supported). Schwab is comparable. Vanguard works but some mutual funds have minimums (their ETFs don't). Avoid most regional banks — their custodial Roth offerings are limited or charge fees.
3. Open the account online. The application requires the parent's SSN + driver's license/passport, the child's SSN, and the child's date of birth. Setup typically takes 10–15 minutes.
4. Fund it. The contribution can come from the child's own bank account or, more commonly, from the parent (matching the child's earned income amount). Many families let the child keep their actual earnings while the parent contributes the equivalent to the Roth — IRS rules don't require the contribution to come from the same dollars the child earned.
5. Invest it. Don't leave the contribution in cash. A simple choice: a single low-cost target-date fund (e.g., "Target Retirement 2080 Fund") that auto-rebalances over time. The Fee-Drag Calculator shows why fund expense ratios under 0.20% matter long-term.
6. File the child's tax return if needed. If the child's self-employment income exceeds $400 (Schedule SE threshold) or if they had W-2 income with withholding, file a return for them. This is also where the earned-income paper trail lives.

The Long-Term Math — Why This Is One of the Highest-Leverage Family Moves

The reason custodial Roth IRAs matter so much isn't the immediate tax savings (a child likely owes no income tax anyway). It's compound growth over an extra decade-plus of runway.

Imagine three siblings: Alex starts at 14, Blair at 25, and Casey at 35. Each makes a single $5,000 Roth IRA contribution and never touches it again. They all earn 7% real returns through age 65.

Alex ends with more than 4× what Casey ends with — from the same $5,000 contribution. The only difference is the 21 extra years of compounding. The 11-year head start over Blair more than doubles the final balance.

Now stretch this further: if a child contributes the maximum each year from age 14 through age 21 (8 years), with even modest earnings to support it, the account at 65 commonly clears $1 million in real terms. Use the Growth Projection tool to model your own assumptions.

Common Mistakes to Avoid

• Counting allowance as earned income. The IRS will not accept allowance for chores as a basis for Roth contributions. The work must look like real work — services rendered to a third party (or to a family business with arms-length terms).
• Skipping the documentation. If the income isn't W-2, build a paper trail: log of work done, payments received, copies of any 1099s. This protects against audit risk and is good practice anyway.
• Forgetting to invest the contribution. Money sitting in the cash sweep at 4–5% is a fraction of what an index fund returns long-term. Always check after contributing that the cash got invested.
• Assuming the parent retains control past majority. At the age of majority in your state, the account converts to a regular Roth IRA in the child's name. Many parents are surprised when their 18-year-old can theoretically liquidate the account. Have the conversation in advance.
• Treating it as a college fund. Roth IRAs allow tax/penalty-free withdrawal of contributions at any time (per IRC §408A(d)(4)), so they technically can be used for college — but that defeats the long-term purpose. A 529 is the better college vehicle; the Roth IRA should stay invested for retirement.

Family Match Strategy — Funding Without Touching the Child's Own Earnings

A common, IRS-acceptable approach: the child keeps their own earnings, and the parent contributes the equivalent amount to the Roth IRA. The child sees their bank account grow normally; the parent quietly seeds the Roth in parallel. The IRS only requires that the contribution amount not exceed the child's earned income — it doesn't require the contribution to come from the same dollars.

This works because IRA contributions are fungible. As long as the documentation supports the earned-income amount, the source of the contributed dollars is immaterial. Many families treat this as a family-match: the child's work creates the contribution-headroom; the parent funds it as a long-term gift.