Last updated: January 2026
One of the most powerful wealth-building tools available isn't just for adults. Your child can open and contribute to a Roth IRA, and the earlier they start, the more powerful it becomes.
A Roth IRA opened at age 10 with consistent contributions could grow to over $1 million by retirement, all tax-free.
But there's a catch: your child needs earned income to contribute. Here's everything you need to know about Roth IRAs for kids in 2026.
What Is a Roth IRA?
A Roth IRA is a retirement account where:
- Contributions are made with after-tax dollars
- Money grows tax-free
- Withdrawals in retirement are completely tax-free
- There are no required minimum distributions
Unlike a traditional IRA, you don't get a tax deduction when you contribute. But decades of tax-free growth and tax-free withdrawals more than make up for it, especially for a child with 50+ years until retirement.
Can a Child Have a Roth IRA?
Yes. There's no minimum age for a Roth IRA. A 6-year-old can have one, and so can a 16-year-old.
The only requirement is that your child must have earned income.
Earned income includes:
- Wages from a job (including working for your business)
- Self-employment income
- Tips
Earned income does NOT include:
- Allowance
- Gifts
- Investment income
This is why paying your child for legitimate business work is so powerful. It creates the earned income they need to contribute to a Roth IRA.
2026 Roth IRA Contribution Limits for Kids
The contribution limit for 2026 is $7,500 or total earned income, whichever is less.
Examples:
- Your child earns $3,000 → They can contribute up to $3,000
- Your child earns $10,000 → They can contribute up to $7,500 (the max)
- Your child earns $500 → They can contribute up to $500
The contribution limit is the same for kids as adults. There's no special "child" limit.
Who Actually Contributes the Money?
Here's where it gets interesting: anyone can fund the contribution. It doesn't have to come from the child's paycheck.
As long as your child has earned income of at least the contribution amount, you (the parent) can gift them the money to contribute.
Example:
- Your child earns $5,000 working for your business
- Your child spends their $5,000 on whatever kids buy
- You gift your child $5,000
- That $5,000 goes into their Roth IRA
This is perfectly legal. The earned income requirement just means they could have contributed their earnings, not that the exact dollars must come from their paycheck.
How to Open a Roth IRA for Your Child
Since minors can't open accounts themselves, you'll open a custodial Roth IRA on their behalf.
Step 1: Choose a Brokerage
Popular options for custodial Roth IRAs include:
- Fidelity (no minimums, no fees)
- Charles Schwab
- Vanguard
Look for no account minimums, no maintenance fees, and low-cost index fund options.
Step 2: Open the Custodial Account
You'll need:
- Your child's Social Security number
- Your information as the custodian
- Proof of the child's earned income (pay stubs, records from your business)
Step 3: Fund the Account
Transfer money into the account. Remember, you can gift your child the contribution amount.
Step 4: Invest the Money
Don't just let it sit in cash. Choose investments appropriate for a long time horizon:
- Total stock market index funds
- Target-date retirement funds
- Low-cost diversified ETFs
With 50+ years until retirement, aggressive growth investments make sense.
Step 5: Transfer Control at Age of Majority
When your child reaches 18 or 21 (depending on your state), the custodial account converts to a regular Roth IRA in their name. They gain full control.
The Power of Starting Early
Here's why a childhood Roth IRA is so powerful.
Example: Starting at Age 10
- Contribute $5,000/year from ages 10-18 (9 years)
- Total contributions: $45,000
- Stop contributing at 18 and let it grow until age 65 (47 years)
- Assuming 8% average annual return: approximately $1.4 million
Example: Starting at Age 25
- Contribute $5,000/year from ages 25-65 (40 years)
- Total contributions: $200,000
- Assuming 8% average annual return: approximately $1.3 million
The child who started at 10 contributed less than one-quarter of the money but ended up with more. That's compound interest at work.
Tax Benefits Explained
For Your Child
If your child earns under the standard deduction ($16,100 in 2026), they owe zero federal income tax on their earnings. The Roth contribution is made with "tax-free" money, and it grows and comes out tax-free.
It's like a triple tax benefit:
- No tax going in (if under standard deduction)
- No tax while growing
- No tax coming out
For Your Business
The wages you pay your child are a deductible business expense, reducing your taxable income. You're essentially moving money from your higher tax bracket to your child's zero bracket.
Can My Child Withdraw the Money?
Roth IRA withdrawal rules apply to kids too.
Contributions can be withdrawn anytime, tax-free and penalty-free. Your child contributed $30,000 over the years? They can take that $30,000 out whenever they want.
Earnings generally must stay in the account until age 59½ to avoid taxes and penalties. However, exceptions exist for:
- First-time home purchase (up to $10,000)
- Qualified education expenses (taxes but no penalty)
- Disability
The goal is to leave it alone and let it grow, but flexibility exists if truly needed.
How Kids Payroll Helps
Kids Payroll makes it easy to create the earned income your child needs for Roth IRA contributions.
The app:
- Tracks your child's work hours and earnings
- Provides documentation proving earned income
- Tracks Roth IRA contributions alongside earnings
- Projects future growth so your child can see the power of compound interest
Frequently Asked Questions
Does my child need to file a tax return to contribute to a Roth IRA?
Not necessarily. If your child's earned income is below $16,100, they don't need to file. However, having documentation of their earned income (pay records from your business) is essential to prove eligibility for Roth contributions.
Can I contribute to my child's Roth IRA if they work for someone else?
Yes. As long as your child has earned income from any source (your business, a neighbor's lawn care, a part-time job), they're eligible to contribute.
What if my child contributes too much?
Excess contributions are subject to a 6% penalty per year until corrected. Make sure contributions don't exceed their earned income or the annual limit.
What happens if my child doesn't use the money for retirement?
They can always withdraw their contributions (not earnings) tax and penalty-free. Or they might use exceptions like the first-time homebuyer provision. The money isn't locked away forever, though leaving it to grow is the best strategy.
Can a grandparent fund a child's Roth IRA?
Yes. Anyone can contribute to (or gift money for) a child's Roth IRA, as long as the child has sufficient earned income.
Disclaimer: This article is for educational purposes only and does not constitute tax, legal, or investment advice. Consult qualified professionals for guidance specific to your situation.