The Custodial Roth IRA Trick: How to Turn Your Teen's Summer Paycheck Into a $1M Nest Egg
Learn how to help your teen open a custodial Roth IRA and turn their summer paycheck into decades of tax-free growth.
Question: My 15-year-old son is doing landscaping this summer for neighbors, and it looks like he’ll earn about $1,500. Is there a minimum age to contribute to a Roth IRA, and must he have a W-2?
If my son can open a Roth, would he be able to contribute up to the $7,500 annual limit?
Answer: There’s no minimum age to contribute to a Roth IRA. Your son simply needs earned income from a job or self-employment (interest, dividends or investment income don’t count). If he earns $1,500 this year, he can contribute up to $1,500. If he earns more than the annual limit, he can contribute up to the 2026 maximum of $7,500.
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Oh, and he doesn’t need a W-2 or 1099 to contribute. Informal work like babysitting, mowing lawns or gig jobs qualifies as long as he can show proof of earnings.
Because he’s likely receiving money from a variety of neighbors, he should keep a log of how much he is paid and when.
“Parents should help their child document the work done and compensation received and the dates to provide to the IRS if needed,” says Maura Cassidy, former vice president of retirement for Fidelity, now retired.
"Keep copies of any checks he receives as payment," Cassidy said. "It also helps to track earnings on a spreadsheet or in a notebook that you keep with your tax files as proof that he earned income from a job."
Give him a head start with a custodial Roth IRA
The maximum amount your son can contribute to a Roth for the year is based on his earnings, but he doesn’t need to contribute himself. You can give him the money to contribute, or you can match his contributions.
Because he’s a minor, he’ll need a custodial Roth IRA, which can be opened and managed by an adult on his behalf. Fidelity, which has no minimum investment requirement, allows parents, grandparents, aunts, uncles or even family friends to open and manage an account for a minor.
Opening a custodial Roth IRA has never been simpler than it is right now in 2026. Brokers are making it accessible with zero annual fees and no (or very low) minimum deposits. Fidelity and Charles Schwab(pdf) both offer $0 minimums with no account or maintenance fees, while Vanguard allows minors to open a brokerage IRA with no minimum.
More families than ever are taking advantage of the custodial Roth IRA, giving teens a powerful head start on tax-free compounding on their hard-earned money.
Contributing to a Roth IRA
Contributing to a Roth IRA can give your child a huge head start on future savings. He will be able to withdraw the contributions at any age and for any reason without taxes or penalties. Plus, he can withdraw the earnings tax-free after age 59½.
For example, a 15-year-old who contributes the maximum $7,500 per year until age 50, then continues contributing $7,500 (or more with catch-up contributions later) could easily save well over $2.5 million by age 65, assuming a conservative 7% average annual return.
And, even if he doesn’t earn enough to contribute the full $7,500 in the early years, he’ll still amass a significant amount of money he can withdraw tax-free in retirement.
Benefits for teens
- Tax-free growth for 50+ years.
- Contributions (not earnings) can be withdrawn penalty-free anytime for college, a car or a first home.
- Opening a Roth IRA teaches financial responsibility and investing habits early.
- No income limits for contributions when the teen’s own income is low.
- If your teen keeps contributing into their 20s and 30s, the numbers become life-changing — potentially $2 to $4 million or higher with continued growth according to US Bank.
How to open a Roth IRA
The process of opening a Roth IRA for your 15-year-old son (or any other teenager) is surprisingly easy.
Confirm earned income — This includes W-2 wages or self-employment income from babysitting, dog walking, lawn care, etc. Allowances and gifts don’t count.
Open a custodial Roth IRA — You, as your son's parent or guardian, will open and manage the account until he reaches the age of majority — the legal age when an individual is considered an adult and gains full rights and responsibilities under the law — usually 18–21, depending on the state.
Fund the account — Transfer money to the account based on the teen’s earnings.
Invest wisely — Choose low-cost index funds or target-date funds. The real magic happens through consistent, long-term investing, not necessarily stock picking.
Give your teen a big head start with a Custodial Roth IRA
Contributing to a Roth IRA can give your child a massive head start on building wealth, with bonuses that can't be ignored — they can withdraw their contributions at any time, for any reason, completely tax-free and penalty-free.
Then, once your child reaches age 59½ and the account has been open for at least five years, those earnings can also be withdrawn entirely tax-free. Open a Roth IRA for your child today and set them up for lifelong financial success. You’ll both be glad you did.
Related content
- How to Open a Custodial Roth IRA: A Guide for Grandparents
- Roth IRAs: What They Are and How They Work
- How — and Why — to Give to Your Grandkids
- Gift Like Buffett: Three Financial Gifts for Kids and Grandkids
