Yes, you can open an IRA for your child at any age, provided the child has earned income from actual work. The account is a custodial IRA: your child owns it, you manage it until they reach the age of majority in your state. For 2026, the contribution ceiling is $7,500 or your child’s total earned income for the year, whichever is lower.1Internal Revenue Service. Retirement Topics – IRA Contribution Limits Most parents open a Roth version, because a child in a zero or near-zero tax bracket gets decades of tax-free growth in exchange for giving up a deduction they wouldn’t have used anyway.
Your Child Needs Earned Income
This is the one rule you cannot work around. The IRS defines earned income as compensation from work: wages, tips, or net self-employment earnings from things like tutoring, babysitting, mowing lawns, or selling crafts. Allowances, birthday money, investment dividends, and interest on a savings account do not count.2Internal Revenue Service. Topic No. 451, Individual Retirement Arrangements (IRAs)
The pay also has to be reasonable for the work. Paying an eight-year-old $50 an hour to sweep the garage will draw scrutiny. If your child works for an outside employer, the W-2 handles the paperwork. If the income is self-employment, keep a simple ledger with dates, tasks, hours, and amounts paid. Hold onto those records for at least three years from the date you file the return, which lines up with the standard period during which the IRS can request verification.3Internal Revenue Service. How Long Should I Keep Records
The Money Itself Can Come From You
The contribution dollars don’t have to come out of your child’s pocket. If your teenager earned $3,000 mowing lawns last summer and spent all of it, you can still deposit up to $3,000 into their IRA from your own account. The IRS cares that the child had $3,000 in earned income, not whose bank account funded the deposit. Effectively it’s a gift to your child’s retirement account, and for almost all families it fits comfortably inside the annual gift tax exclusion.
Roth or Traditional for a Child
A Roth almost always wins here. Roth contributions go in with after-tax dollars, but most kids earn well below the standard deduction ($16,100 for a single filer in 2026), so there’s little or no federal income tax on the money to begin with.4Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026 Everything then grows tax-free, and qualified withdrawals in retirement come out tax-free.5Internal Revenue Service. Roth IRAs
A traditional IRA gives you a deduction now and taxes the money when it comes out later.6Internal Revenue Service. Traditional and Roth IRAs That trade works for a high-income adult in a steep tax bracket. For a child who owes no tax today, there’s essentially no deduction worth capturing, so the case for traditional collapses.
How Much and by When
The 2026 limit is $7,500 for anyone under 50,1Internal Revenue Service. Retirement Topics – IRA Contribution Limits but for most children the practical cap is total earned income. If your daughter made $2,400 babysitting, $2,400 is the maximum. The $7,500 figure never comes into play.
Contributions for a given tax year can go in anytime up to that year’s tax filing deadline. So 2026 contributions have until April 15, 2027,7Internal Revenue Service. IRA Year-End Reminders which gives you time to add up what your child actually earned before deciding on a final amount.
If you overshoot, the excess is hit with a 6% excise tax each year it sits in the account.8Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities Withdraw the excess plus any earnings on it before the filing deadline and the penalty doesn’t apply.
Opening the Account
Most major brokerages offer custodial Roth IRAs online, and the application takes about 15 minutes. You’ll need:
- For the child: full legal name, Social Security number, and date of birth.
- For you as custodian: your Social Security number, address, government-issued ID, employment status, and annual income. Brokerages collect this under standard anti-money-laundering rules.
- Proof of the child’s earnings: a W-2 if there’s a formal employer, or your self-employment ledger otherwise. The brokerage may not ask upfront, but the IRS can, so keep it filed.
Once you link a bank account and fund the first deposit, the account typically confirms within a few business days and you can start investing right away.
Getting Money Back Out
Part of what makes a Roth work so well for a child is the withdrawal flexibility. Contributions (the money you put in, not the investment gains) can come out at any time, at any age, tax- and penalty-free. The IRS treats Roth withdrawals as coming from contributions first.5Internal Revenue Service. Roth IRAs If your child has contributed $15,000 over the years and the account is now worth $22,000, they can pull up to $15,000 without owing anything.
Earnings are the tighter piece. Taking out investment gains before age 59½ generally means income tax plus a 10% early withdrawal penalty. Two carve-outs matter for a young saver:
- Qualified higher education expenses like tuition and fees can be paid from earnings without the 10% penalty, though income tax may still apply if the account hasn’t met the five-year rule.9Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions from Traditional and Roth IRAs
- A first-time home purchase can pull up to $10,000 in earnings penalty-free.9Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions from Traditional and Roth IRAs
The five-year clock for tax-free earnings starts January 1 of the year of the first contribution. Open the account when your child is 12 and the requirement is satisfied by age 17, long before the money is likely to be needed.
What Happens to Financial Aid
Retirement accounts are not reported as assets on the FAFSA, so a custodial Roth IRA balance doesn’t count against your child when the Student Aid Index is calculated. A regular custodial brokerage account is treated as a student asset and assessed at 20%, which can meaningfully reduce aid eligibility. The exception: if your child actually takes a distribution, it shows up as income on a later FAFSA and can affect aid the following year. Time any withdrawal after the last FAFSA is filed if you can. Some schools that use the CSS Profile ask about retirement balances directly, so the shielding is weaker there.
When Your Child Takes Full Control
The custodial arrangement has an end date. When your child reaches the age of majority under your state’s law, the brokerage converts the custodial IRA into a standard IRA in your child’s name and they get full control. Depending on the state and how the account was set up under the Uniform Transfers to Minors Act, that usually happens at 18 or 21. A few states let the person who established the account push the handoff later, sometimes to 25.
Full control is exactly what it sounds like: your child can change investments, take withdrawals, or close the account, and you have no legal authority to stop them. Have the conversation well before the transfer date. Modest contributions can compound into something substantial over 50 or 60 years, but only if the money stays invested, and a frank talk about what an early cash-out actually costs is the best safeguard you have.