Open A Roth IRA For Your Child
Open a Roth IRA for your child as soon as she has her first job. Give her decades of tax-free growth — and teach her about money in the process.
Why You Should Open a Roth IRA for Your Child
Tax-Free Growth
A Roth IRA grows tax-free, and withdrawals in retirement are tax-free too. Because your child is starting so young, compounding has an extraordinary amount of time to work — which makes this one of the most powerful wealth-building tools available to her.
Here's a simple example: say your child earns $2,500 per summer for all four years of high school. She contributes $1,250 each summer, and you match another $1,250.
Assuming a 7% rate of return, her Roth IRA could grow to nearly $2.4 million — tax-free — by age 60 (hypothetical illustration assuming 7% annual return; actual results will vary and are not guaranteed).
That's in future dollars. Adjusting for 3% inflation, it's still roughly $634,000 in today's purchasing power — not bad for a high school summer job (hypothetical illustration assuming 3% annual inflation; actual results will vary and are not guaranteed).
Teach Your Child About Money
The process itself is a financial education. Have her contribute so she has skin in the game. Match her contributions to give her an incentive. Show her what the account could grow to if she leaves it alone. Few lessons will stick the way this one does.
How to Open a Roth IRA for Your Child
Which Custodian to Use
Many investment custodians offer custodial Roth IRAs for minors, including Charles Schwab, Fidelity, and Vanguard. If you're working with a financial advisor, they can handle this for you — it's something we do regularly for our clients.
Your child is the account owner; you are the custodian. She gains full control of the account at your state's age of majority (typically 18 or 21). Once she's older, encourage her to keep contributing every year she has earned income.
How Much to Contribute
The annual contribution limit is the lesser of your child's earned income or $7,500 (2026).
Earns $2,000: max contribution is $2,000.
Earns $8,000: max contribution is $7,500 (2026 max).
Contributions are due by the tax filing deadline — typically April 15, though this can shift if that date falls on a weekend or holiday.
Both you and your child can contribute to her Roth IRA, as long as the combined total doesn't exceed her earned income or the annual limit, whichever is less. In the example above, she earned $2,500 and you each contributed $1,250.
Once she reaches the age of majority, you can still contribute on her behalf — for example, continuing to match her contributions through college graduation.
What to Invest In
Keep it simple: a low-cost fund that's 100% in the stock market. Yes, stocks are volatile. That's exactly why they have a higher expected return over the long run. Your child has decades to ride out the inevitable ups and downs.
For our clients' children, we often use DFA Global Equity (DGEIX) or Vanguard Total World Stock Index (VTWAX or VT).
Both funds cover the entire global stock market, not just U.S. equities. That broader diversification matters: U.S. stocks have led the way in recent years, but that won't always be the case, and no one can consistently predict when the tide turns.
These are examples of how we approach this for our clients — what's right for your child's account may differ based on your situation.
Real-World Logistics
To determine your child's maximum contribution, you need her exact earned income — found in Box 1 of Form W-2 (wages, tips, other compensation). W-2s must be issued by the end of January.
The practical workflow: wait until the W-2 arrives, confirm her earned income, then make the contribution before the tax filing deadline.
If your child earns money that isn't reported on a W-2 — lawn mowing, babysitting, tutoring — see Roth IRA For Your Child With Cash Income for how to handle that.
Ready to put this into practice? If you're an ER physician or high-income professional looking for straightforward, evidence-based financial guidance, we'd love to connect. Schedule a free intro call with Yahara Wealth Management — no pressure, no sales pitch, just a conversation.
This post is for educational purposes only and does not constitute personalized financial, tax, or investment advice. Investment returns are not guaranteed, and past performance does not predict future results. Consult a qualified financial advisor before making investment decisions.