The Custodial Roth IRA
The Retirement Account Your Kid Can Open Before They Can Drive
Your child is out there hustling—babysitting the neighbor’s kids, dog-walking half the block, or maybe pulling in mini paychecks from the family business. Before they blow it all on gaming gear or bubble tea, let’s talk about how to turn those small-but-mighty earnings into a retirement head start.
Enter the Custodial Roth IRA—a.k.a. the coolest retirement account you’ve probably never heard of for kids who earn money.
What Is a Custodial Roth IRA?
It’s basically a Roth IRA for minors—meaning your child can start investing for retirement before they even understand what retirement is. Like a regular Roth IRA, you contribute after-tax dollars, the money grows tax-free, and qualified withdrawals in retirement are also tax-free. It’s a triple win.
But here's the twist: since your child isn’t legally an adult (and still asks you to cut the crust off their sandwiches), you, the parent, are the custodian of the account. You manage it until they turn 18 (or 21 in some states), at which point the account becomes theirs.
Who Qualifies?
There’s just one requirement: Your child must have earned income. Unfortunately, allowance doesn’t count. But, earned income can be:
Babysitting
Lifeguarding
Lawn mowing
Pet sitting
Working in your small business
Scooping ice cream, folding t-shirts, modeling, you name it
As long as the income is documented and legitimately earned, it qualifies. Even if they made $500 babysitting over the summer, they can contribute that amount up to the annual Roth IRA limit, but no more than their earned income.
Why Start This Young?
Because time is the magic sauce. A $1,000 contribution at age 15 could grow to over $20,000 by the time they retire—without them lifting another finger. Compound interest is basically the fairy godmother of investing, and it teaches your kid:
How to save
How to invest
How to delay gratification
Plus, it's a baller move to say your teen has a retirement account.
How Do You Open One?
Just like you would for yourself:
Pick your brokerage (Fidelity, Schwab, Vanguard—whichever you like best).
Open a Custodial Roth IRA account.
Fund it with your child’s earned income (you can gift them the money to contribute, but they must have earned that amount).
Choose a simple, diversified portfolio, made up of low-cost index funds or ETFs.
A Quick Note on Taxes
Because the contributions are made with after-tax dollars and most kids don't earn enough to owe any income tax, it’s like getting the benefits of a Roth IRA without any tax pain. It’s one of the rare times the IRS gives you a high-five.
Mom Brain Recap
Custodial Roth IRA = Roth IRA for minors
Your child must have earned income (babysitting, part-time job, etc.).
Contributions grow tax-free and can be withdrawn tax-free in retirement.
You can open one at major brokerages like Fidelity, Schwab, or Vanguard.
Build a simple 3-fund portfolio with low-cost index funds or ETFs.
Start early and let compound interest work its magic.
Retirement might be 50+ years away for them, but teaching your kid how to build wealth now? That’s some next-level mom-ing.
Join SheWealth’s FREE Resource Garden to get tools to help you master your finances.