A Roth IRA for kids allows a minor to begin saving for retirement using after-tax income they’ve earned from a job. While the account must be opened and managed by an adult custodian, the money inside grows tax-free and can be withdrawn tax-free in retirement. Kids can contribute up to the annual IRS limit, provided they have earned income, such as from babysitting, dog walking or a part-time job. Starting early gives the account more time to benefit from compound growth.

If you want hands-on guidance to manage a Roth IRA or other assets, consider working with a financial advisor.

What Is a Roth IRA for Kids?

A Roth IRA for children works similarly to one that would be under your name. However, you can take full control of the account and manage investments. As long as your child is younger than 18, you can serve as the account custodian.

But your child still gets some benefits to encourage him or her to save. For instance, the child’s money will grow tax free as long as it stays invested in the account. Plus, your child can make penalty-free withdrawals once he or she reaches age 59 ½. Nonetheless, your child can withdraw his or her contributions without consequence at any time.

Roth IRA Rules for Kids

When you open a Roth IRA under your child’s name, the account works a bit differently than one you’d open for yourself. For example, the contribution limit in 2025 for account holders younger than 18 is $7,000 or the total of earned income, whichever is less.

So what exactly is earned income? It covers just about anything your child can make from a W-2 job to babysitting or dog walking. However, the contributions your child makes toward the Roth IRA can’t exceed what he or she made for the year. So if your kid made $1,000 walking dogs in 2025, the maximum Roth IRA contribution is $1,000.

Of course, you can always contribute your own money toward the child’s account. For tax purposes, however, that would count as a gift. So you may have to file a gift tax return if you contribute more than $19,000 in 2025 (up from $18,000 in 2024) to your child’s Roth IRA. This doesn’t necessarily mean you’d have to pay a gift tax, however.

The lifetime estate and gift tax exemption is worth $13.99 million in 2025 (up from $13.61 million in 2024). That’s how much you can gift to others before you have to pay a gift tax. However, this limit will rise to $15 million in 2026 under the One Big Beautiful Bill Act, which President Trump signed into law on July 4, 2025.

Generating your quiz…

Roth IRA for Kids Tax Rules

A Roth IRA can offer children several tax benefits while teaching them the value of saving and investing. For example, your child can watch his or her investments grow tax free. This can foster an early interest in the value of saving for retirement. Plus, your child can withdraw his or her contributions in case of emergency without having to pay a penalty or income tax on the distribution.

In order to withdraw investment earnings tax free, however, the account holder must be at least 59 ½ years old. The account would also have to had been opened for at least five years before making qualifying withdrawals.

Roth IRA for Children Withdrawal Rules

Once your child reaches age 59 ½, he or she can make penalty and tax-free withdrawals from the Roth IRA, as long as it has been open for at least five years. Still, the IRS makes a few exceptions.

For example, your son or daughter can take up to $10,000 worth of investment earnings out of the account without facing any tax consequences if the money is used to purchase a home. So when your kid leaves the nest, he can turn to his Roth IRA to make a down payment or pay off a mortgage.

Your kid can also take money out of the account tax free to fund qualified educational expenses. This includes tuition, mandatory college fees, books needed to enroll in classes and more. In this case, your child won’t face the 10% penalty for early withdrawals, but he may owe regular income tax on the withdrawal.

A better solution may be opening a 529 college savings plan. These work very similarly to retirement plans. Your investments grow tax free and your child can use the money to fund qualified educational expenses.

How to Open a Roth IRA for Your Child

You can check with your bank to see if you can open a Roth IRA in your child’s name. Large investment management firms like Fidelity and Charles Schwab also offer Roth IRAs for kids. And when you open one, you have several investment options. You can build an investment portfolio for your child with stocks, bonds, mutual funds and more. Or you can invest in a target-date fund.

These are professionally managed funds that automatically shift asset allocations to take on less risk as your child gets closer to retirement when he or she would need the money the most.

Overall, the process of opening a Roth IRA for your child takes about 15 minutes. You can even set one up online. You’d just need your Social Security number and banking information to begin funding the account. But most brokerage firms don’t require a minimum investment. So your child can start saving with as much or as little as he or she wants.

Bottom Line

A woman teaches her daughter how to save money, planning on opening an IRA for her child.

Opening a Roth IRA for your child can be a great way to help your kid start planning for retirement as soon as possible. Plus, your kid will get all the benefits adults with Roth IRAs get. This includes tax-free growth on your investments and tax-free withdrawals at retirement.

Financial Tips for Parents

A financial advisor can help you map out ways to support your child’s financial growth, from funding education to transferring wealth efficiently. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Help your child open a high-yield savings account with a competitive interest rate. Watching their balance grow slowly but steadily can reinforce the value of delayed gratification and compound interest.