Custodial Roth IRA for Kids: Open One Before They Turn 15

A custodial Roth IRA is one of the most powerful financial accounts a parent can open for a child, and most people have never heard of it. If your kid has earned any income, they qualify. The math behind starting at 14 versus starting at 22 is almost impossible to argue with.

This guide covers exactly what a custodial Roth IRA is, who qualifies, how to open one in 15 minutes, and what the numbers look like when you start early. No jargon. Just the facts and the math.

Already have a Roth IRA yourself? You can read about Roth IRA vs Traditional IRA or how to open a Roth IRA step by step. This post is specifically about opening one for your child.

What Is a Custodial Roth IRA?

A custodial Roth IRA works exactly like a regular Roth IRA, with one difference: a parent or guardian manages it until the child reaches adulthood, which is 18 or 21 depending on the state.

The child owns the money. The parent controls the account. Every dollar grows tax-free until retirement. No taxes on gains. No taxes on qualified withdrawals. That is the whole idea.

When the child reaches adulthood, the account converts to a standard Roth IRA in their name, and they take over full control. At that point, they may have a decade or more of compounding already behind them.

Who Qualifies for a Custodial Roth IRA? The Earned Income Rule

Here is the catch: your child needs earned income to contribute. Investment income, gifts, and allowances do not count. The IRS requires that Roth IRA contributions come from earned income only.

What counts as earned income for a child:

• Wages from a part-time or summer job
• Babysitting income
• Lawn mowing, snow shoveling, or odd jobs
• Tutoring, social media work, or selling crafts online
• Paid work for a family business (must be legitimate and documented)

The contribution limit is the lesser of $7,000 (the 2026 limit) or the child's total earned income for the year. So if your 14-year-old earns $2,000 babysitting, you can contribute up to $2,000 to their custodial Roth IRA. You can make that contribution yourself. The money just has to match what they actually earned.

The Custodial Roth IRA Math That Changes Everything

This is the part worth paying attention to. Say you contribute $200 a month to a custodial Roth IRA invested in a simple S&P 500 index fund averaging 8% annually. Here is what that looks like depending on when you start:

Eight years of head start is worth more than $2 million. That is not a typo. Because it is a Roth, none of that balance gets taxed when your child withdraws it in retirement.

This is the same compounding principle covered in generational wealth building and dollar cost averaging — the earlier the money goes in, the longer it has to grow.

How to Open a Custodial Roth IRA for Your Child

The process takes about 15 minutes online. Here are the steps:

1. Choose a brokerage — Fidelity, Schwab, and Vanguard all offer custodial Roth IRAs with no minimum balance and no account fees
2. Open the account in your name as the custodian, with your child listed as the account owner
3. Link a bank account to fund the first contribution
4. Choose investments (more on this below)
5. Set up automatic monthly contributions so the account grows without you having to think about it

Fidelity is the most beginner-friendly option. Their custodial Roth IRA has no minimums, no fees, and allows fractional shares, so you can invest in any ETF regardless of share price. You can also read how to open a Roth IRA step by step for the full account-opening walkthrough.

What to Invest In Inside a Custodial Roth IRA

Keep it simple. A child's Roth IRA has 50 or more years to grow, which means they can handle more short-term volatility than someone close to retirement. Three solid options:

• VTI (Vanguard Total Stock Market ETF) — over 4,000 U.S. companies in one fund, extremely low expense ratio
• VOO (Vanguard S&P 500 ETF) — the 500 largest U.S. companies, the standard benchmark most funds try to beat
• A target-date fund such as Fidelity Freedom 2075 — automatically shifts from aggressive to conservative as the child ages; the simplest option that still works

Pick one and automate contributions. Trying to pick individual stocks inside a child's Roth IRA adds risk without much upside when you have five decades to let the market work. You can read more about index fund investing and why it is the strategy most long-term wealth builders stick with.

The Matching Strategy That Teaches the Lesson

One approach that works well: match what your child earns, dollar for dollar.

Your teenager earns $1,500 working a part-time job over the summer? You contribute $1,500 to the custodial Roth IRA. They see real money growing in an account with their name on it. You teach the lesson that earning and saving at the same time is how wealth actually builds, not one or the other.

Some parents give this as a birthday or holiday gift instead of buying more stuff that gets forgotten in a month. A $500 Roth IRA contribution at age 14 is worth more than any gadget you could buy.

Custodial Roth IRA vs. 529 Plan: Which Comes First?

A 529 plan is built for education expenses. A Roth IRA is built for retirement, but here is a key difference: contributions (not earnings) can be withdrawn at any time, for any reason, without taxes or penalties.

That flexibility matters. If your child earns a full scholarship or chooses a trade school, a 529 has strict rules about what the money can be used for. A Roth IRA has no such restriction on contributions already made.

Most financial educators suggest: fund the custodial Roth IRA first, then the 529, if your budget allows both. The Roth gives your child more flexibility and a much longer runway for tax-free growth.

When Does the Child Take Over the Custodial Roth IRA?

When your child reaches the age of majority in your state, which is 18 in most states and 21 in a few others, the custodial Roth IRA automatically converts to a standard Roth IRA in their name. You no longer manage it. They do.

That transition is the goal. The account becomes fully theirs, with 40 or more years of compounding still ahead. Start at age 14 and they hit 18 with four years of growth already behind them and a real head start on retirement.

Common Custodial Roth IRA Questions

Can a child under 14 open a custodial Roth IRA?
Yes, as long as they have earned income. A 10-year-old who earns money doing work for a family business can qualify, as long as the work is legitimate and documented.

What if my child stops earning income one year?
You skip that year. The account stays open and keeps growing. No penalty for not contributing in a given year.

Can my child withdraw the money before retirement?
Contributions (not earnings) can be withdrawn at any time without taxes or penalties. Earnings become tax-free after age 59.5 and after the account has been open for five years.

What if we start late, say at 17?
Start anyway. A 17-year-old who opens a custodial Roth IRA today and contributes for one year still hands that money 48 years of compounding when they take over the account at 18. Late is better than never, by a wide margin.

Does my child need a Social Security number?
Yes. The account is opened under the child's Social Security number as the account owner. If your child does not have one yet, getting that is the first step.

The Bottom Line on Custodial Roth IRAs for Kids

Most parents spend money on toys, gadgets, and experiences their kids forget about in a year. A custodial Roth IRA is the one gift that keeps compounding for 50 years. Your 14-year-old does not fully understand what $4 million at retirement means. Your kid at 65 will thank you for not waiting until they did.

The setup takes 15 minutes. The benefit lasts a lifetime. If your child has any earned income at all, there is no reason to wait. And if you want to model exactly what their account will be worth decade by decade with your real numbers, the Wealth Building Spreadsheet Pack has a projection tab built for exactly that.

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