Roth IRA for Minors: How to Start Your Kid's Retirement Before They Graduate

Maya Hartwell Parent-Tested ✓

Former math teacher · Mom of two · Founder, WealthSprout

My Roth IRA Regret (And Why I'm Doing This Differently for My Kids)

I was 34 years old, sitting in my car after a particularly exhausting day of teaching seventh-grade math, when I first really understood what a Roth IRA was.

Thirty-four.

I had two degrees. I'd been filing taxes for over a decade. I'd paid off $31,000 in debt through sheer determination and spreadsheet obsession. And I had never—not once—been told that I could have started a tax-free retirement account at 15, when I was scooping ice cream at Baskin-Robbins for $5.15 an hour.

I did the math that night. Because that's what I do. If I had put just $1,000 into a Roth IRA at 15 and never added another penny, it would have grown to over $29,000 by the time I was sitting in that car at 34. Tax-free. With zero additional effort from teenage me.

I ugly-cried into my steering wheel.

Not because I was bitter (okay, a little bitter), but because I realized how simple this information was—and how it had somehow never made it into any classroom, any conversation with my parents, any guidance counselor's office. My parents weren't financially savvy. They didn't know. And so I didn't know.

My kids will know.

My oldest is 11 now, and I've already started talking to him about earned income and what it means. By the time he's 14 or 15 and lands his first job—mowing lawns, tutoring, whatever it ends up being—we're opening a Roth IRA together. No excuses. No "we'll figure it out later."

And if you're reading this, you're already ahead of where I was. You're asking the right questions at the right time. So let's make sure your kid doesn't have a steering wheel moment at 34.

What Is a Roth IRA for Minors, Really?

A Roth IRA for minors is exactly what it sounds like: a Roth IRA opened for someone under 18. It follows all the same rules as a regular Roth IRA—contributions are made with after-tax money, investments grow tax-free, and withdrawals in retirement are completely tax-free.

The only real difference? Since your kid is a minor, the account needs an adult custodian (that's you) until they reach the age of majority in your state—usually 18 or 21.

Here's what makes a Roth IRA particularly powerful for teenagers:

• Tax-free growth for 50+ years. Your teen won't pay taxes on any gains. Ever. A 15-year-old has 50+ years of compounding ahead of them.
• Contributions can be withdrawn anytime. If your kid needs the money they put in (not the earnings), they can take it out penalty-free. This isn't locked away forever.
• Low or zero tax bracket now. Most working teens pay little to no income tax, so contributing to a Roth now—when their tax rate is basically 0%—means they'll never pay taxes on this money.
• No required minimum distributions. Unlike traditional IRAs, Roth IRAs don't force you to start taking money out at a certain age.

The IRS has specific rules about Roth IRAs, but here's the headline: there's no minimum age to contribute. If your kid has earned income, they can have a Roth IRA. Period.

The Earned Income Requirement: What Actually Counts

This is where parents get tripped up. I see this question constantly: "My kid made $500 selling crafts on Etsy. Does that count?"

The answer depends on one thing: Is it earned income?

What COUNTS as earned income:

• Wages from a W-2 job (fast food, retail, lifeguarding)
• Self-employment income (babysitting, lawn mowing, tutoring, freelance work)
• Money earned from a family business (with some caveats—see below)
• Tips

What DOESN'T count:

• Allowance
• Gifts from grandparents
• Investment income (dividends, interest)
• Money from selling stuff (unless it's a legitimate business)

The key rule: your kid can only contribute up to the amount they earned that year, or the annual Roth IRA limit—whichever is less. In 2026, the annual limit is $7,000.

So if your teenager earned $3,000 from their summer job, they can contribute up to $3,000. If they earned $10,000, they can contribute up to $7,000 (the max).

If your kid has been finding creative ways to make money, a lot of that income likely qualifies. Babysitting? Earned income. Running a lawn care business? Earned income. Selling handmade jewelry at craft fairs? If it's a legitimate business (not just a one-time garage sale), that's earned income too.

Custodial Roth IRA vs. Regular Roth IRA: What's the Difference?

When people say "Roth IRA for minors," they're usually talking about a custodial Roth IRA. Let me break down what that actually means.

A custodial Roth IRA is a Roth IRA opened in a minor's name, with an adult (the custodian) managing the account until the child reaches adulthood. The money belongs to the child—it's their account, their Social Security number, their tax responsibility. You're just the responsible adult making sure a 15-year-old doesn't YOLO their retirement into meme stocks.

Once your kid reaches the age of majority (18 in most states, 21 in a few), the account automatically converts to a regular Roth IRA in their name. You're off the hook, and they take full control.

Here's a quick comparison:

Important note: You cannot open a Roth IRA in your name and then transfer it to your kid later. The custodial Roth IRA must be opened in your child's name from the start.

How to Open a Roth IRA for Your Minor: Step-by-Step

Alright, let's get practical. Here's exactly how to open a custodial Roth IRA for your teenager.

Step 1: Confirm Your Kid Has Earned Income

Before you do anything else, make sure your teen actually has earned income. This isn't about how much—even $500 counts. But it needs to be legitimate, documentable earned income.

If your kid works for someone else, they'll have a W-2 or pay stubs. If they're self-employed (babysitting, freelancing, etc.), you should help them keep simple records of what they earned and when. The IRS doesn't require a W-2 for minors to contribute, but you need to be able to prove the income if asked.

Step 2: Choose a Brokerage

Not every brokerage offers custodial Roth IRAs, but the major ones do. Here's what I recommend looking for:

• No account minimums (your kid probably isn't starting with $3,000)
• No account fees (why pay fees on a small account?)
• Low-cost index funds (we'll talk about what to invest in next)
• Easy-to-use interface (so your teen can actually learn to navigate it)

Fidelity's custodial Roth IRA is a solid choice—no minimums, no fees, and they have good educational resources. Charles Schwab and Vanguard also offer custodial Roth IRAs with similar features.

Step 3: Gather Your Documents

You'll need:

• Your teen's Social Security number
• Your Social Security number (as custodian)
• Your teen's date of birth
• Your address
• Bank account info for funding the account

Step 4: Open the Account Online

The application takes about 15 minutes. You'll select "Custodial Roth IRA" (sometimes called "Roth IRA for Minors" or "Roth IRA for Kids"), enter your teen's information as the account owner, and your information as the custodian.

Step 5: Fund the Account

Here's where it gets interesting. The money going into the account doesn't have to come from your kid's bank account. It just has to represent earned income they made.

So if your teenager earned $2,000 lifeguarding this summer and spent it on concert tickets and Chipotle (relatable), you can contribute $2,000 to their Roth IRA from your own bank account. This is completely legal and is often called a "gifted" contribution—you're essentially gifting them money equal to their earnings.

Many parents do a matching system: "You earned $2,000? I'll put $2,000 in your Roth IRA, and you can keep what you earned for spending." This gets the money invested without your teen feeling like they're sacrificing their entire paycheck.

Step 6: Invest the Money

Once the money is in the account, it's just sitting there as cash. You need to actually invest it. (I've seen parents forget this step and wonder why the account isn't growing. The money doesn't invest itself!)

What to Actually Invest In (No Vague "Invest Wisely" Here)

I'm not going to tell you to "invest wisely" or "choose investments that match your risk tolerance." That's useless advice. Here's what I actually recommend for a teenager's Roth IRA.

My pick: A total stock market index fund.

Specifically:

• VTI (Vanguard Total Stock Market ETF) — expense ratio: 0.03%
• FSKAX (Fidelity Total Market Index Fund) — expense ratio: 0.015%
• SWTSX (Schwab Total Stock Market Index Fund) — expense ratio: 0.03%

Why a total stock market fund? Because your teenager has 50+ years until retirement. They don't need bonds. They don't need to be conservative. They need growth, and historically, the stock market has provided that over long time horizons.

A total stock market fund gives instant diversification across thousands of companies. It's boring. It's not exciting. And that's exactly what you want for long-term retirement investing.

If you want to add some international exposure:

• VXUS (Vanguard Total International Stock ETF)
• FZILX (Fidelity ZERO International Index Fund)

A simple approach: 80% total US stock market, 20% international. Or honestly? 100% total US stock market is fine for a teenager. Keep it simple.

Set up automatic investments if you can. Even $50/month into VTI will add up. As Investopedia explains, compound interest is incredibly powerful over long time periods—and your teen has the longest time horizon of almost any investor.

If your family is already using the three-jar system for managing money, the Roth IRA becomes a natural extension of the "Save" or "Invest" jar—just with serious tax advantages.

What Parents Are Really Asking Online

I spend a lot of time in parent forums and Reddit threads (for research, I promise). Here are real questions parents are asking about Roth IRAs for minors—and the answers they need.

From r/RothIRA: "Does my kid need to file taxes to have a Roth IRA?"

This thread had parents confused about whether their kids need to file tax returns to open a Roth IRA.

The answer: No, your kid doesn't need to file a tax return to contribute to a Roth IRA. They just need to have earned income. Many working teens don't meet the income threshold for mandatory filing, but they can still contribute to a Roth IRA. The brokerage isn't checking whether your kid filed taxes—they're just opening an account based on your attestation that your child has earned income.

That said, if your teen has self-employment income over $400, they may need to file to pay self-employment tax, regardless of their total income. Worth checking with a tax professional if you're unsure.

From r/fidelityinvestments: "I'm confused about setting up a custodial Roth IRA"

This thread showed parents struggling with the actual account setup process.

The answer: The terminology can be confusing. When you go to open an account, look for "Roth IRA for Minors," "Custodial Roth IRA," or "Roth IRA for Kids." The account owner is your child (their Social Security number), and you're listed as the custodian. You'll have login access and investment control until they reach the age of majority.

If you're having trouble finding the option online, call the brokerage directly. Their customer service can walk you through it in 15 minutes.

The Mind-Blowing Math: Why Starting at 15 Matters

I'm a math teacher at heart, so let me show you why this matters with actual numbers.

Let's compare two scenarios:

Scenario A: Start at 15

• Contribute $3,000/year from ages 15-18 (4 years)
• Total contributed: $12,000
• Never contribute another penny
• At 8% average annual return, by age 65: $509,317

Scenario B: Start at 25

• Contribute $3,000/year from ages 25-35 (10 years)
• Total contributed: $30,000
• Never contribute another penny
• At 8% average annual return, by age 65: $472,482

Read that again. Starting at 15 and contributing LESS money ($12,000 vs $30,000) results in MORE at retirement ($509,317 vs $472,482).

That's the power of time. Those 10 extra years of compound growth are worth more than $18,000 in additional contributions.

Now imagine your teenager continues contributing throughout their 20s and 30s. We're talking about potential millionaire status from money they started saving while they were worrying about geometry homework and prom dates.

For a deeper dive into Roth IRAs specifically for the teenage years, check out our guide on Roth IRAs for teenagers.

Frequently Asked Questions

Can I contribute to my kid's Roth IRA if they spent all their earnings?

Yes! The contribution just needs to be equal to or less than their earned income. The money doesn't have to literally come from their paycheck. You can contribute to their Roth IRA from your own account as long as they earned at least that much during the year. This is a common (and smart) strategy—you fund their retirement while they enjoy their earnings.

What happens to the account when my kid turns 18?

The custodial Roth IRA automatically converts to a regular Roth IRA in your kid's name. They gain full control of the account—including the ability to withdraw, change investments, or (hopefully not) close it. This is a great opportunity to have a conversation about the value of what they've built and why they should leave it alone.

Can my kid withdraw the money before retirement?

Contributions (the money you put in, not the earnings) can be withdrawn at any time, tax-free and penalty-free. So if your teen contributed $10,000 over the years and the account has grown to $15,000, they could withdraw up to $10,000 without any penalties. The $5,000 in earnings would face taxes and a 10% penalty if withdrawn before age 59½ (with some exceptions, like first-time home purchase).

Does self-employment income really count?

Absolutely. Babysitting, lawn mowing, tutoring, freelance work, selling crafts—all of this counts as earned income as long as it's a legitimate business activity (not just selling your old toys). Keep basic records: who paid your teen, how much, and when. The IRS rarely audits teenagers, but documentation protects you if questions ever arise.

What if my kid only earns $500? Is it even worth it?

Yes! $500 invested at age 15, growing at 8% annually, will be worth about $14,780 by age 65. That's $500 turning into nearly $15,000—completely tax-free. Every dollar counts when you have 50 years of growth ahead. Plus, you're building the habit and teaching them the system. The $500 matters less than the lesson.

Can both parents be custodians?

No, only one custodian can be listed on the account. However, either parent can be designated, and you can change the custodian if needed (in cases of divorce, death, etc.). The non-custodian parent can still contribute money to the account—they just won't have direct management access.

Get Your Teen Started Today

Here's what I know: the best time to open a Roth IRA for your kid was whenever they first earned income. The second best time is right now.

Don't let this be another thing you "mean to get around to." The math doesn't care about your intentions—only your actions. Every month you wait is compound growth your teenager doesn't get back.

Talk to your teen this week. Show them the math. Help them understand that their future 65-year-old self will be incredibly grateful for the decision they make at 15, 16, or 17.

And if you want help making this a bigger conversation about building real financial literacy—not just opening one account, but understanding how money actually works—that's exactly what we built WealthSprout for.

Your kid won't have a steering wheel moment at 34. You're making sure of that right now.

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