How To Open A Roth IRA For My Child | Set Up Tax-Free Savings

A custodial Roth IRA lets a working minor invest earned income for tax-free growth while a parent manages the account until adult age.

A Roth IRA for a child sounds unusual until you learn the one rule that matters: your child must have earned income. Age isn’t the blocker. Pay is. If your kid has wages from a job or income from side work, you can open a custodial Roth IRA and start saving early.

This walkthrough keeps it practical: how to prove earned income, open the right account type, fund it within IRS limits, and invest it without turning the account into a part-time job.

What a custodial Roth IRA is and why earned income matters

A Roth IRA uses after-tax dollars. The upside is that qualified withdrawals later can come out tax-free. A custodial Roth IRA is the same account, opened for a minor under custodial rules. Your child is the owner. You’re the custodian, meaning you handle trades and paperwork until control transfers under your state’s age rules.

What counts as earned income for a child

Earned income is money paid for work: W-2 wages, tips, and self-employment income from jobs like babysitting, tutoring, yard work, dog walking, lifeguarding, or editing. Gifts from relatives don’t count. Investment income doesn’t count. If it didn’t come from work, it doesn’t create contribution room.

Who can put money into the account

Your child’s earnings set the ceiling, but the dollars you contribute can come from you. One common setup: your child earns $1,200, you contribute up to $1,200, and your child keeps their pay for spending or saving elsewhere.

Contributions across all IRAs for that child can’t exceed the annual IRS limit or the child’s earned income for the year, whichever is lower. The IRS keeps the current numbers on IRA contribution limits.

How To Open A Roth IRA For My Child in 9 steps

Step 1: Confirm earned income and save proof

If your child has a W-2 job, you’re set. If they earn money from cash jobs or gigs, create a simple record: date, task, who paid, amount, and how it was paid. Keep texts, invoices, or payment app history. A basic trail beats no trail.

Step 2: Choose “custodial Roth IRA” as the account type

Brokerages may label it “custodial Roth IRA” or “Roth IRA for kids.” You want the custodial registration so the IRA is owned by the child and managed by you until the transfer age.

Step 3: Pick a brokerage that won’t fight you on small balances

Look for no account fees, low-cost funds, fractional shares, and clean tax forms. Two mainstream starting points are Fidelity Roth IRA for Kids and Schwab Roth IRA for kids. You can still shop around, but those pages show what “normal” paperwork looks like.

Step 4: Gather the details the application will ask for

Have your child’s Social Security number, legal name, mailing location, and date of birth ready. You’ll also enter your own ID details as custodian. Most delays come from missing IDs.

Step 5: Open the account online and read the transfer-age note

Enter your child as the owner and you as the custodian. During setup, you’ll see the age when custodial control ends under the account’s state rules. Save that detail for later family talks.

Step 6: Link a bank account for funding

Link your bank account, your child’s teen checking, or both. Funding source doesn’t change the IRS cap. The cap still tracks the child’s earned income for the year.

Step 7: Set the contribution amount and timing

You can contribute once a year, monthly, or after seasonal work. If income is uneven, many parents wait until late in the year so the earned income total is clear.

IRA contributions for a tax year are generally allowed up to the tax filing due date for that year. The IRS explains contribution rules and definitions in Publication 590-A.

Step 8: Invest the money so it doesn’t sit in cash

New IRAs often park deposits in a cash sweep by default. Pick investments after each contribution. If your brokerage offers automatic investing, that can keep things tidy.

Step 9: Do a once-a-year check

Once a year, confirm: earned income proof is saved, contributions don’t exceed earnings, and the investment mix still matches your plan. That’s it.

Eligibility and paperwork checklist you can copy

This checklist keeps the account clean if you ever need to show how contributions matched earned income.

Checklist item	What to gather	Why it matters
Proof of earned income	W-2, pay stubs, or a dated income log	Shows the child had compensation that allows a contribution
Cash job notes	Client name, date, task, amount paid	Backs up income that didn’t issue tax forms
Payment evidence	Texts, invoices, receipts, payment app history	Adds detail if the income is ever questioned
Child identity info	Social Security number, legal name, mailing location	Required to open the IRA in the child’s name
Custodian identity info	Adult ID details, SSN, contact info	Brokerage verification for the adult managing the account
Transfer age note	Brokerage custodial disclosure	Sets when the child gains full control
Funding link	Bank routing and account numbers	Lets you move money in without paper checks
Contribution plan	Target annual amount and deposit timing	Keeps deposits aligned with earnings
Investment plan	Fund tickers or a simple model mix	Stops cash from sitting idle

Contribution rules that catch parents off guard

Most mistakes come from mixing up who earned the money and who deposited it. The earned income must belong to the child. The contribution dollars can come from a parent. The cap still tracks the child’s earned income for the year.

Apply the IRS annual limit, then apply the child’s earnings limit

The IRS sets a yearly IRA contribution ceiling. For 2026, the IRS announced an increase to $7,500 for people under age 50. See the IRS release on IRA limit increases for 2026.

For many kids, earnings are the tighter cap. If your child earns $900, the max contribution is $900, while the annual ceiling is higher.

Roth IRA income limits rarely block kids

Roth IRAs phase out at higher income levels based on modified adjusted gross income. Most kids won’t come close, but the rule exists. If your teen has high earnings from acting, sports, or a serious business, double-check the income limits for the year.

Self-employment can trigger extra tax work

If your child is paid as a contractor or runs a small gig, taxes can get tricky. Self-employment income can trigger Social Security and Medicare taxes once net earnings pass the IRS threshold. A tax preparer can help you sort filing steps and records.

Investing choices that stay low-maintenance

For a child’s Roth IRA, the best plan is the one you’ll keep doing. Many families stick to one diversified fund and add money over time.

One-fund approach

A broad stock index fund or a target date fund can be a simple one-and-done pick. You get diversification in one holding, and rebalancing is minimal.

Two-fund approach

If you want a small bond slice for smoother swings, keep it simple:

• Broad US stock index fund
• Broad bond index fund

Withdrawal rules to learn before you fund the account

Roth IRA flexibility depends on what part of the account you take out. Contributions and earnings follow different rules.

Money type	When it can be taken	Tax and penalty notes
Contributions	Any time	Contributions can come out tax-free since they were after-tax
Earnings	After age 59½ and 5-year rule met	Qualified withdrawals are tax-free; early earnings withdrawals can face tax and a 10% penalty
Converted amounts	After 5 years per conversion	Early withdrawal can trigger a penalty tied to the conversion clock
Selected penalty exceptions	Subject to IRS rules	Some early withdrawals may avoid the penalty; taxes on earnings may still apply

Penalty exceptions have fine print. If you want the IRS overview of what Pub. 590-A explains and where to find the sections you need, use About Publication 590-A.

Common parent missteps and how to avoid them

Overfunding the IRA

It’s easy to deposit more than your child earned, especially with small cash jobs. Keep a running total of earnings and contributions.

Leaving money uninvested

If you don’t pick investments, cash may sit idle. Make “contribute” and “invest” part of the same task.

Ignoring the handoff

At some point, your child will control the account. Start early with simple money language: what the account is for, why diversified funds reduce risk, and why panic selling can lock in losses.

A setup-day checklist you can use in one sitting

• Save proof of earned income
• Open a custodial Roth IRA with your child as owner
• Link a bank account for transfers
• Choose a yearly contribution target tied to earnings
• Invest deposits after they land
• Store records in one folder for tax time