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savings

Open Low-Minimum Roth IRAs for Kids

These three firms make it easy for kids to start small Roths.

I want to set up a Roth IRA for my son, who is 16 and has started to work, but we can’t meet the $1,000 initial investment or the $100 monthly automatic investment that most investment companies require. Can you recommend any brokerages or fund companies with lower minimums?

It’s a wonderful idea to set up a Roth IRA for your son, and your timing is perfect: You can open a Roth IRA for a child of any age who has earned income from a job, and you have until April 17, 2012, to make contributions for 2011. You can invest up to the amount of income the child earned for the year, with a $5,000 maximum.

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A few firms make it easy for kids to start small Roths. TD Ameritrade has no minimums or annual fees for its IRAs (the IRA must be in the minor’s name as well as the custodian’s name, and it must use the minor’s tax ID number). You can invest in stocks, funds or other investments available in the firm’s brokerage accounts, including more than 100 commission-free exchange-traded funds. And you can sign up to have any amount – even just $50 per month – automatically transferred from a bank account to the IRA.

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Scottrade offers IRAs to minors with a minimum investment of $500 for new accounts and with no annual fees or setup costs. Charles Schwab allows minors to open a custodial Roth IRA with $100; it charges no annual or maintenance fees.

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