Roth IRA for Kids: Can I Open a Custodial Roth IRA for a Child?

When thinking of the best ways to save money for your child’s future, a Roth IRA rarely makes the list as a top retirement savings vehicle for kids. But it absolutely should!

What is an IRA?

Young people often open IRAs with their first paychecks when they start working after school. Though, in truth, IRAs make excellent retirement investment vehicles for people of an even younger age.

What is a Custodial Account?

When a minor has an investment account, it is usually in the name of the child’s parents or other guardian. These types of accounts go by the name “custodial account” or guardian accounts because the custodian makes decisions on behalf of the beneficiary.

What is a Custodial Roth IRA and What are the Rules?

This type of IRA doesn’t get offered by any financial institution which offers an IRA. These investment accounts are more niche than a standard IRA, allowing minors to start investing in their retirement.

What is a Custodial Roth IRA and What are the Rules?

→ There’s no age limit. If your baby lands a modeling gig and earns income, that money can go into a Roth IRA for kids. The hurdle to opening this type of account isn’t about age, rather, it’s income.

The child must have earned income. If your kid has earned income, they can open a custodial Roth IRA for kids. Be careful what qualifies as “earned income” however. That doesn’t mean allowance money or money received as gifts from friends and family.

How to Open a Custodial Roth IRA for Kids

You have many different options for custodial accounts, including investing with a brokerage or bank. In most cases, you will want an investment account for your Roth IRA for kids, not just a simple bank account that earns interest.

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