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– Updated June 2026 –
a smart way to save
AAA’s savings products and services can help you simplify your finances and be more confident about your money.
Planning for your child’s financial future starts earlier than you might think. One of the most powerful tools available is a custodial Roth IRA for kids, which can help grow savings tax-free for decades.
If your child earns income—and pays taxes on it—they may be eligible. Starting early allows compound growth to work its magic, setting them up for long-term financial success.
A custodial Roth IRA is a retirement savings account that a parent or guardian manages on behalf of a minor. It functions just like a standard Roth IRA, with a few key differences:
The key benefits of a custodial Roth IRA include:
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Watch NowThe account operates under standard Roth IRA rules:
Because children have a long investment horizon, even small contributions can grow significantly.
There’s no minimum age requirement, but there is one important rule: Your child must have earned income and pay taxes on it.
This includes money from:
It’s important to note that the contribution amount cannot exceed the child’s total earned income for the year.
The IRS sets annual contribution limits, which can change each year.
If the child earns more than the limit, they can invest the excess amount in a certificate of deposit, savings account or another financial tool.
The best time to start is as soon as your child begins earning income. The benefits of starting early include:
Even small contributions made during teenage years can grow substantially by retirement.
Financial planning for empty nesters and those nearing retirement age is about preparing for what’s next, whether that’s retirement, supporting aging parents or helping adult children.
One of the biggest advantages of a Roth IRA is flexibility. Contributions can be withdrawn tax-free at any time without a fee or penalty. However, to withdraw the account’s earnings (money earned from interest or dividends), the account holder must be at least 59½ years old and have had the account open for at least 5 years. At that time, they can enjoy penalty-free withdrawals.
Although Roth IRAs are designed to be long-term investments, this flexibility makes them a versatile savings tool—not just for retirement, but potentially for:
Earnings can be withdrawn tax-free at any time for these expenses as long as the account is at least five years old.
While a custodial Roth IRA offers strong tax advantages, it’s important to remember that it’s designed for retirement income. Consider combining it with these short-term strategies:
High-yield savings accounts
Money market accounts
Certificates of deposit (CDs)
Each of these options serves a different purpose, so choosing the right mix depends on your goals.
A custodial Roth IRA is a great tool for retirement down the road, but it also helps children:
It’s not just about retirement—it’s about teaching lifelong money habits.
If your child earns income, opening a custodial Roth IRA could be one of the smartest financial decisions you make on their behalf. As with other financial matters, it’s important to work with a professional who can help you:
With the right plan in place, you can give your child a powerful head start toward their long-term financial independence.
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Join Today!A custodial Roth IRA is a retirement savings account that a parent or guardian manages on behalf of a minor. It works like a standard Roth IRA, but an adult controls the account until the child reaches the age of majority in their state, at which point it transfers to the child. Contributions use after-tax income, which allows for tax-free growth and tax-free withdrawals in retirement. Key benefits include tax-free investment growth, no required minimum distributions, flexible withdrawal rules for contributions, and decades of compounding potential.
The account follows standard Roth IRA rules. You can withdraw contributions at any time without taxes or penalties, while earnings can be withdrawn tax-free after age 59½ if the account is at least five years old. Investments grow tax-free over time, so even small contributions can grow significantly thanks to a child's long investment horizon.
There's no minimum age requirement, but your child must have earned income and pay taxes on it. Qualifying income can come from babysitting or dog walking, lawn care or household services, part-time jobs, freelance or gig work and activities like performances, modeling or online content. Contributions cannot exceed the child's total earned income for the year.
The IRS sets annual contribution limits, which can change each year. A child can contribute up to the annual limit or their earned income—whichever is less. For example, if the limit is $7,500 and a child earns $3,000, the maximum contribution is $3,000. Parents can contribute on the child's behalf, but only up to the amount the child earned.
The best time to start is as soon as your child begins earning income. Starting early allows more time for compound growth, helps build strong financial habits and creates a long-term investment mindset. Even small contributions made during the teenage years can grow substantially by retirement. Consider working with a professional who can help you understand eligibility and rules, choose the right investments and align savings with long-term goals.
You can withdraw contributions tax-free at any time without a fee or penalty. To withdraw earnings (money from interest or dividends), the account holder must be at least 59½ years old and have had the account open for at least five years. While Roth IRAs are designed as long-term investments, this flexibility also makes them useful for first-time home purchases and education-related expenses (with conditions).
Beyond building retirement savings, a custodial Roth IRA helps children learn financial responsibility, understand long-term investing and build wealth early with tax-free growth. It's a powerful way to teach lifelong money habits.
a smart way to save
AAA’s savings products and services can help you simplify your finances and be more confident about your money.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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