You’ve heard about the incredible power of a Roth IRA for kids. You understand how it can transform a few dollars from a summer job into a tax-free fortune decades from now. But there’s one nagging thought holding you back: isn’t it complicated? The paperwork, the rules, the investment choices—it all sounds overwhelming. What if we told you that you can open a Roth IRA for your child in less time than it takes to watch a cartoon?
This guide will demystify the process completely. We’ll walk you through five simple, actionable steps to set up a custodial Roth IRA, empowering you to give your child a massive head start on their financial future without the headache.
Before You Begin: The Golden Rule
Before you even think about applications, you must confirm one thing: your child must have earned income. This is a non-negotiable IRS rule. Money from a W-2 job (like a cashier at a local shop) or self-employment income (like babysitting, mowing lawns, or selling crafts online) qualifies. Gifts, allowance, or investment interest do not.
Once you’ve confirmed your child has legitimate earnings, you’re ready to go. Let’s get started.
How to Open a Roth IRA for a Child: The 5 Steps
Step 1: Choose the Right Custodian
A custodian is simply the financial institution that will hold and manage the Roth IRA. Since your child is a minor, you will act as the custodian, making decisions on their behalf. You’ll want to choose a brokerage firm that offers custodial Roth IRA accounts (sometimes called minor Roth IRAs).
Three of the most popular and reputable options are:
- Fidelity®: Known for its user-friendly platform, zero-fee index funds, and no account minimums. Their “Roth IRA for Kids” is a straightforward option.
- Charles Schwab: Offers a wide range of investment choices, excellent customer service, and no account minimums. Their “Schwab One Custodial IRA” is a solid choice.
- Vanguard®: Famous for its low-cost index funds and ETFs, making it a favorite for long-term, passive investors.
What to look for: When comparing, prioritize low fees, no account minimums, and a good selection of low-cost index funds or ETFs. For a child’s long-term account, keeping costs down is critical.
Step 2: Gather the Necessary Documents
To make the application process seamless, have the following information ready for both yourself (the custodian) and your child (the minor):
- Full Name and Date of Birth
- Home Address
- Social Security Number (SSN)
You will also need your own driver’s license or other identifying information to open the account. The brokerage needs to verify the identities of both the custodian and the minor to comply with federal regulations.
Step 3: Complete the Online Application
This is the core step, and it’s surprisingly fast. Navigate to your chosen brokerage’s website and look for the option to “open a new account.” Be sure to select the Custodial Roth IRA or Roth IRA for Minors option.
The application will guide you through several sections:
- Custodian Information: You’ll enter your personal details first.
- Minor’s Information: Next, you’ll provide your child’s information.
- Funding Information: You’ll link a bank account to transfer money into the new Roth IRA. This can be your bank account or your child’s.
The entire process is typically done online and can be completed in about 15 minutes. Follow the on-screen prompts carefully, and don’t hesitate to use the customer service chat if you have questions.
Step 4: Fund the Account
Once the account is approved (which is often instant), it’s time to contribute money. Remember the contribution rules:
- You can only contribute up to the amount your child earned for that year.
- The maximum contribution for 2025 is $7,000.
If your child earned $1,500 from a summer job, you can contribute any amount up to $1,500. You can make a lump-sum contribution or set up recurring automatic transfers. Many parents find it helpful to match their child’s earnings as an incentive.
Step 5: Invest the Money
This is the final, crucial step. Money sitting as cash in a Roth IRA won’t grow. You must invest it. For a child’s long-term account, you don’t need a complex strategy. Simplicity is key.
Consider these popular, beginner-friendly options:
- Target-Date Fund: These funds are designed with a specific retirement year in mind (e.g., a “2070 Fund” for a young child). They automatically adjust their risk level, becoming more conservative as the target date approaches. It’s a true “set it and forget it” option.
- Broad-Market Index Fund: A fund that tracks a major market index like the S&P 500 (which holds the 500 largest U.S. companies) or a total stock market index. These are low-cost, diversified, and have historically provided strong returns over the long run.
Involve your child in this step! Show them what they are investing in—whether it’s a fund that holds shares in companies like Apple, Disney, and Nike—to make the concept of ownership real and exciting.
You’ve Done It! What’s Next?
Congratulations! You’ve successfully opened and funded a Roth IRA for your child. You’ve given them a gift that will grow with them for decades. Now, your role is to continue nurturing this account and their financial education. Keep track of their earned income each year, contribute when you can, and talk to them about how their investments are performing.
You’ve taken the first step. The next 50 years of compound growth will do the rest.
Disclaimer: The information provided in this article is for educational purposes only and is not intended as financial, investment, or legal advice. RothIRA.Kids is not a financial or legal firm. We encourage you to consult with a qualified professional before making any financial decisions.