## Quick Answer

A Roth IRA for kids is one of the most powerful wealth-building tools available. If your child contributes **$5,000/year from age 10 to 18**, they could have **over $1.3 million by age 65** (assuming 7% returns), all tax-free. The catch? Your child needs **earned income** to contribute. Here's how to make that happen.

## The Math That Changes Everything

Compound interest is powerful. But compound interest over 50+ years? That's life-changing.

Here's what happens when you start early:

| Starting Age | Annual Contribution | Years Contributing | Total Contributed | Value at 65 (7%) |
| --- | --- | --- | --- | --- |
| Age 10 | $5,000 | 8 | $40,000 | $1,318,000 |
| Age 14 | $5,000 | 4 | $20,000 | $506,000 |
| Age 22 | $5,000 | 43 | $215,000 | $1,142,000 |

Notice something remarkable: the child who contributes **$40,000 total** (age 10-18) ends up with more than the adult who contributes **$215,000 total** (age 22-65).

That's the magic of time. Every year you wait costs your child hundreds of thousands of dollars in future wealth. Use our [Roth IRA Calculator](/content/resources/roth-ira-calculator/index.html) to see projections for your child's specific situation.

## The Catch: Your Child Needs Earned Income

Here's where most families get stuck. To contribute to a Roth IRA, your child must have **earned income**.

What counts as earned income:

- Wages from employment (W-2)
- Self-employment income (1099)
- Babysitting, lawn mowing, and other work for neighbors
- Work for a family business
- Household work paid by parents (with proper documentation)

What does NOT count:

- Allowance (unless tied to specific work)
- Investment income (dividends, interest)
- Gifts from relatives
- Birthday money

**The contribution limit:** Your child can contribute up to $7,500 (2026) or their total earned income, whichever is less. If your child earns $3,000, they can only contribute $3,000.

## Solution: Hire Your Kids

The most reliable way to create earned income for your child is to **pay them for real work**.

This is completely legal and IRS-approved. You can pay your children for:

- **Household work:** Cleaning, yard work, organizing, pet care
- **Business work:** Filing, data entry, social media, photography

The key requirements:

1. The work must be real and actually performed
2. The pay must be reasonable for the work done
3. You must have proper documentation (employment agreement, work logs, payment records)

Learn more: [How to Hire Your Kids: The Complete Guide](/content/guides/hire-your-kids/index.html)

## How to Open a Custodial Roth IRA

A custodial Roth IRA is a Roth IRA opened in a child's name, managed by a parent until the child turns 18 (or 21 in some states).

### Step 1: Choose a Brokerage

These brokerages offer custodial Roth IRAs with no minimums and no fees:

- **Fidelity:** No minimums, excellent index funds
- **Charles Schwab:** No minimums, good customer service
- **Vanguard:** Requires $1,000 minimum for some funds

### Step 2: Gather Required Information

You'll need:

- Child's Social Security Number
- Child's date of birth
- Parent's information (as custodian)
- Source of earned income documentation

### Step 3: Open the Account

The process typically takes 15-30 minutes online. The parent opens the account as custodian, and the child is the account owner.

### Step 4: Fund and Invest

Contribute up to the limit (or your child's earned income, whichever is less). Invest in low-cost index funds—a total stock market index fund is a great choice for a 50+ year time horizon.

## Contribution Limits and Rules

| Rule | 2026 Details |
| --- | --- |
| Contribution Limit | $7,500 or earned income, whichever is less |
| Minimum Age | No minimum (earned income required) |
| Deadline | Tax filing deadline (April 15 for most) |
| Who Can Contribute | Anyone: parent, grandparent, child themselves |
| Withdrawals | Contributions can be withdrawn anytime, tax-free |

**Important:** The contribution doesn't have to come from the child's own money. You can pay your child, then contribute that same amount to their Roth IRA from your own funds. The only requirement is that the child has earned income equal to or greater than the contribution.

## Roth IRA vs. 529 Plan: Which Is Better?

Both are tax-advantaged accounts for your child's future. Here's how they compare:

| Feature | Roth IRA | 529 Plan |
| --- | --- | --- |
| Tax-free growth | ✓ | ✓ |
| Use for education | ✓ | ✓ |
| Use for retirement | ✓ | ✗ |
| Use for first home | ✓ | ✗ |
| Penalty for non-qualified use | 10% on earnings only | 10% + income tax |
| Requires earned income | Yes | No |
| Annual contribution limit (2026) | $7,500 | $18,000+ (varies by state) |

**Our take:** The Roth IRA is more flexible. If your child doesn't go to college, the money is still there for retirement, a first home, or emergencies. A 529 that isn't used for education faces penalties (though recent laws allow rolling some into a Roth IRA).

## The Documentation Connection

Here's the challenge: if the IRS questions your child's Roth IRA contribution, you need to prove they had earned income.

This means you need:

- **Employment agreement:** Proof of the employment relationship
- **Work logs with timestamps:** Proof the work actually happened
- **Payment records:** Proof you paid them
- **W-2:** Official tax document reporting wages

A spreadsheet you fill in at year-end isn't good enough. The IRS wants _contemporaneous_ records, which means documentation created when the work was performed.

This is exactly what [employkids](/content/site-root.html) provides: server-timestamped work logs, generated employment agreements, and a complete year-end tax packet.

## Frequently Asked Questions

### Is there a minimum age for a Roth IRA?

No. There is no minimum age to contribute to a Roth IRA. The only requirement is that your child has earned income.

### How much can a child contribute to a Roth IRA in 2026?

Up to $7,500 or their total earned income, whichever is less. If your child earns $3,000, they can only contribute $3,000.

### Can grandparents contribute to a child's Roth IRA?

Yes. Anyone can contribute to a child's Roth IRA as long as the child has earned income. The contribution cannot exceed the child's earned income.

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

The custodial Roth IRA automatically converts to a regular Roth IRA in your child's name. They gain full control of the account.

### Can my child withdraw from their Roth IRA?

**Contributions** can be withdrawn at any time, tax-free and penalty-free. **Earnings** withdrawn before age 59½ may be subject to taxes and a 10% penalty (with some exceptions like first home purchase or education).

## Sources

- [IRS Publication 590-A](https://www.irs.gov/publications/p590a): Contributions to Individual Retirement Arrangements
- [IRS Publication 590-B](https://www.irs.gov/publications/p590b): Distributions from Individual Retirement Arrangements
- [IRS Retirement Topics](https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits): IRA Contribution Limits