Custodial Roth IRA for Kids: Why a Summer Job Could Fund a Lifetime of Growth
School’s Out (a great Alice Cooper song)
I hear that song in my head every time our kids’ schools end for the summer. I have to admit it’s mainly from watching the movie Dazed and Confused vs. being a huge fan of Alice Cooper. Note that this movie is from 1993, and I am not totally sure if it holds up!
That said, school letting out usually means summer jobs for enterprising teenaged kids who are typically saving for something material like pickup truck wheels (yes, that hits close to home). However, first jobs are a good opportunity to encourage kids to save for something longer term. And a Roth IRA can be the perfect vehicle for just that.
When parents and grandparents think about helping a child build a strong financial future, college savings accounts often come to mind. But Roth IRAs are often overlooked. A Roth IRA allows children with earned income to begin investing for retirement at a young age, giving them something incredibly valuable, time.
One of the greatest advantages of investing is compound growth. Money invested during childhood has decades to grow, potentially turning relatively small contributions into significant savings over time. For example, a teenager who contributes just a few thousand dollars per year to a Roth IRA may accumulate substantially more by retirement than someone who waits until their 30s to begin saving.
Source: Fidelity
To contribute to a Roth, a child must have earned income. This can include wages from a part-time job or income from activities such as babysitting, lawn care, tutoring, or other legitimate work. The annual contribution cannot exceed the child’s earned income for the year and is subject to IRS contribution limits ($7,500 for 2026).
Contributions are made with after-tax dollars, but the real benefit comes later. Investments grow tax-free, and qualified withdrawals in retirement are also tax-free. For young investors who are likely in a very low tax bracket (and have no overhead!), paying taxes now and enjoying tax-free growth for decades can be an attractive strategy.
A Roth IRA can also serve as a valuable teaching tool. Children learn about earning income, saving consistently, investing for the future, and the benefits of long-term planning. We often see parents offer to match their kids’ own contributions in order to encourage sound financial management. A Roth IRA for kids may not be as exciting as the latest truck wheel, but it has the potential to provide benefits that last a lifetime.
My son not saving for a Roth
