How to Open a Roth IRA for Your Child: Rules, Limits, and Steps

To open a Roth IRA for your child, choose a brokerage that offers custodial Roth IRAs, gather Social Security numbers and dates of birth for you and your child, link a bank account, and fund the IRA up to the lesser of your child’s earned income for the year or $7,500 for 2026.¹ You act as custodian and manage the investments until your child reaches the age of majority under your state’s law, at which point control transfers to them.

Your Child Must Have Earned Income That Year

This is the rule that decides whether the account can be funded at all. The child must have earned income during the tax year of the contribution, and the contribution cannot exceed what they earned. The IRS treats wages, salaries, tips, and self-employment income as compensation.² A W-2 job creates the cleanest paper trail. Informal work counts too: babysitting, lawn mowing, tutoring, or selling handmade goods, as long as the child was paid for services they personally performed.

Investment income, allowances, and gifts do not qualify. A child who earns $3,000 from a summer job can contribute up to $3,000, not the full $7,500 annual cap.¹

For informal self-employment, keep a dated log of when the child worked, what they did, who paid them, and how much. Something as simple as “June 14 — mowed Johnson yard — $40 cash” in a notebook or spreadsheet is enough. Hold on to these records for at least three years after the contribution year, because that log is your only defense if the IRS ever questions eligibility.

The Money Doesn’t Have to Come From the Child

The IRS cares that the child earned enough income to justify the contribution, not whose bank account the deposit came from. A parent, grandparent, or anyone else can fund the account up to the child’s earned income for the year.³

In practice, that means you can let your child spend their paycheck on the things teenagers actually want and deposit an equivalent amount into the IRA yourself. A dollar-for-dollar match on what they contribute from their own earnings works too. Total contributions from every source combined still cannot exceed the child’s earned income or the federal annual limit, whichever is lower.

Contribution Limits and Deadlines for 2026

The 2026 contribution ceiling for individuals under 50 is $7,500.¹ Most children earn less than that, so their real cap is whatever they earned during the year.

You can make contributions for a given tax year between January 1 of that year and the tax-filing deadline of the following year, typically April 15.⁴ For the 2026 tax year, that means you have until April 15, 2027, to finish funding the account.

Overcontributing triggers a 6% excise tax on the excess for each year it stays in the account.⁵ You can avoid the penalty by withdrawing the excess and any earnings it produced before the tax-filing deadline, including extensions.⁶

What You Need to Open the Account

Not every brokerage offers custodial Roth IRAs. Confirm the option before starting. Fidelity, Charles Schwab, and Vanguard all offer them, generally with no minimum balance and no account-opening fees. On brokerage websites the product may be labeled “Roth IRA for Kids” or “Custodial IRA” rather than sitting with the standard retirement accounts.

To complete the application, have the following ready:

Social Security numbers for both the custodian and the child.
Dates of birth for both.
The custodian’s residential address.
Routing and account numbers for the bank account that will fund the IRA, usually the parent’s.
The child’s citizenship status, for tax residency purposes.

Some firms ask for a scan of the child’s birth certificate or other identification to verify age, so have a clear image ready. The application will also present custodial disclosures explaining your responsibilities and the terms under which control eventually passes to the child. Read them before signing.

Steps to Open and Fund the Account

The online application takes about 15 to 20 minutes. Fill in details for you and your child, make sure the names and Social Security numbers match government records exactly, and sign electronically. A transposed digit in a Social Security number will hold everything up.

Verification takes anywhere from the same business day to about five business days. Once the account is approved, transfer money in from the linked bank account. The brokerage may send a small test deposit first to confirm the bank link. Funds usually settle within two business days after transfer.

Once the cash lands, you’ll pick investments. For a child with decades ahead of them, a low-cost total stock market index fund or a target-date fund is the most common starting point. Save the brokerage’s contribution confirmation together with your child’s earned-income records for that tax year.

Withdrawal Rules You Should Know Before Funding

Roth IRAs are more flexible than most retirement accounts, and that flexibility is worth understanding before you deposit money.

Contributions can be withdrawn at any time, for any reason, with no taxes and no penalties. Those dollars were already taxed before going in.
Earnings withdrawn before age 59½ may be hit with income tax plus a 10% early withdrawal penalty, unless an exception applies.
Up to $10,000 in earnings can be withdrawn penalty-free for a first-time home purchase, and tax-free if the five-year holding rule has been met. It’s a lifetime cap, not annual.⁷
Earnings used for qualified higher education expenses avoid the 10% penalty, though income tax on the earnings may still apply if the five-year rule isn’t met and the owner is under 59½.

The five-year clock for tax-free earnings withdrawals starts on January 1 of the year of the first contribution.⁸ Opening the account earlier gets that clock running sooner.

How the Account Affects Financial Aid

The FAFSA excludes retirement accounts, including IRAs, from reportable assets.⁹ Money sitting in your child’s Roth IRA won’t reduce federal aid eligibility the way a regular savings or brokerage account would.

The CSS Profile, used by roughly 200 private colleges for institutional aid, is different. It asks families to report total retirement savings, Roth IRAs included, and schools can factor those balances into their aid calculations. If your child is applying through FAFSA alone, the account is invisible to the aid formula. If CSS Profile schools are on the list, it may not be.

One catch: withdrawing Roth IRA earnings to pay for college can count as income on a future FAFSA and reduce aid the following year. Withdrawing contributions doesn’t create that problem.

What Happens When Your Child Reaches the Age of Majority

Because minors can’t legally own financial accounts, the custodial arrangement operates under your state’s version of the Uniform Transfers to Minors Act. When your child reaches the age of majority — 18 or 21 in most states, and as late as 25 in a few — the assets transfer into an account in their name alone. The brokerage typically contacts the custodian as that date approaches with retitling instructions.

At that point your child has full legal control. They can change the investments, withdraw contributions, or empty the account. You can’t override those decisions. What you can do is use the years before the handoff to show your child what the account is and what leaving it alone would be worth. Logging in together, watching the balance grow, and talking through how the account works is arguably the most valuable use of the account before any money ever comes out.

1
Internal Revenue Service. Retirement Topics – IRA Contribution Limits
2
Internal Revenue Service. Publication 590-A, Contributions to Individual Retirement Arrangements
3
Fidelity. Turbocharge Your Child’s Retirement With a Roth IRA for Kids
4
Vanguard. IRA Deadlines: Why Contributing Early Matters
5
Office of the Law Revision Counsel. 26 USC 4973 – Tax on Excess Contributions to Certain Tax-Favored Accounts and Annuities
6
Internal Revenue Service. IRA Year-End Reminders
7
Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
8
Fidelity. What Is the Roth IRA 5-Year Rule and How Does It Work
9
Federal Student Aid. Net Worth of Your Investments