Custodial Roth IRA for Kids: A Complete Guide for Parents
What a custodial Roth IRA is, who can have one, the 2026 limit, and what happens if your child has no earned income yet.
Key takeaways
- A custodial Roth IRA is a Roth IRA in a child's name, managed by an adult custodian until the child reaches adulthood.
- The child needs earned income; for 2026 the cap is $7,500 or their earned income, whichever is less.
- A child with no earned income can't contribute, but a UTMA, 529 or Trump account can take money instead.
A custodial Roth IRA is a Roth IRA in a child's name that a parent or other adult manages as custodian until the child reaches adulthood. Any child of any age can have one, as long as they have earned income from real work that year. For 2026, contributions are capped at $7,500 or the child's earned income, whichever is less.
Money goes in after tax, grows tax-free, and qualified withdrawals in retirement come out tax-free. This page covers the basics and points you to the detail:
- Every rule and limit: custodial Roth IRA rules and contribution limits
- The steps to open and fund one: how to open a custodial Roth IRA
- Funding one as a grandparent: Roth IRA for grandchildren
- A teenager's first paycheck: your teen's first job and the custodial Roth
Can a child with no income have a Roth IRA?
No. A child with no earned income can't contribute to a Roth IRA, custodial or not. The IRS caps contributions at the child's taxable compensation for the year, so a year with no earned income allows no contribution.
Earned income means wages from a job or self-employment income from real work, such as babysitting, lawn mowing or paid work in a family business. Allowance, birthday money and investment income don't count, however much of it there is.
Until your child earns money, other accounts can take contributions instead. A UTMA, a 529 plan and a Trump account don't require earned income.
Custodial IRA vs. custodial Roth IRA
"Custodial IRA" is the umbrella term. It covers both a custodial traditional IRA and a custodial Roth IRA, and most people searching for one mean the Roth version.
Both follow the same eligibility rule: the child needs earned income. And the annual limit is shared, so a child can't put $7,500 in each. The difference is when tax is paid.
| Custodial traditional IRA | Custodial Roth IRA | |
|---|---|---|
| Contributions | May be tax-deductible | Made with after-tax dollars |
| Withdrawals in retirement | Taxed as income | Tax-free if qualified |
| Contributions taken out early | Taxed, plus a penalty in most cases | Can come out tax- and penalty-free |
Most children owe little or no income tax, so a deduction is worth little to them. That's why the Roth version is the one most families open.
How much can go in, and who can pay for it?
The 2026 cap is $7,500 or your child's earned income for the year, whichever is lower. A child who earned $2,000 can contribute up to $2,000.
The dollars don't have to come from your child's paycheck. A parent or grandparent can fund the contribution while your child keeps their pay, as long as the total doesn't go over what they earned. Keep a simple log of dates, work and amounts paid, so the earned income is easy to show if anyone asks.
The deadline, the withdrawal rules and the tax-filing rules are all in the rules reference.
How do you open one?
You open it as custodian, in your child's name, with their Social Security number. Not every provider offers custodial Roth IRAs, so check for that account type by name before you start. The full walkthrough, including automatic contributions, is in how to open a custodial Roth IRA.
What happens when your child takes over?
Control passes to your child at the age set by your state and the provider, usually 18 or 21. From then on it's a regular Roth IRA in their name, and they decide what happens to it.
Contributions can generally come out without tax or penalty. Earnings are the part with conditions. The custodial handover covers the conversation to have before that date.
Roth IRA vs. UTMA vs. 529 for the same child
| Custodial Roth IRA | UTMA | 529 plan | |
|---|---|---|---|
| Needs earned income | Yes | No | No |
| Tax treatment | Tax-free growth and qualified withdrawals | Taxed to the child, with the kiddie tax above set amounts | Tax-free for qualified education expenses |
| Annual cap | $7,500 or earned income, whichever is lower | No federal cap (gift-tax rules apply) | No annual cap (gift-tax rules apply) |
| FAFSA treatment | Generally not reported as an asset | Student asset, assessed at 20% | Parent asset, assessed at about 5.64% at most |
| Who controls it later | The child, at the age of majority | The child, at the state's transfer age | The account owner, usually a parent |
Many families use more than one. The head-to-head detail is in 529 vs. Roth IRA for kids and Trump accounts vs. 529 vs. Roth IRA. What goes inside the account is a separate decision, and a fee-only planner can help with it.
Where MemoryBank fits
A child's Roth can run for decades, and most kids never see it until they take it over. MemoryBank connects the custodial Roth, UTMA, 529 and savings accounts you've already opened and shows your child one kid-friendly dashboard of what's theirs. Bringing the accounts into one view explains how that works.
MemoryBank is not a brokerage. It cannot receive, keep or transfer securities. This page explains how the account works. For tax questions, especially paying a child through a family business, talk with a tax professional or financial advisor.
Frequently asked questions
What is a custodial Roth IRA?
A custodial Roth IRA is a Roth IRA in a child's name that a parent or other adult manages as custodian until the child reaches adulthood. The child needs earned income to contribute, and for 2026 the cap is $7,500 or the child's earned income, whichever is less. Growth is tax-free, and qualified withdrawals in retirement are tax-free too.
Can a child with no income have a Roth IRA?
No. A child with no earned income can't contribute to a Roth IRA, custodial or not, because contributions are capped at the child's taxable compensation for the year. Allowance, gifts and investment income don't count. A UTMA, a 529 or a Trump account can take contributions without earned income.
What is the difference between a custodial IRA and a custodial Roth IRA?
A custodial IRA can be either a traditional IRA or a Roth IRA held for a minor. Both need earned income and share one annual limit. Traditional contributions may be deductible and withdrawals are taxed later; Roth contributions are after-tax and qualified withdrawals are tax-free, which is why most families pick the Roth.
Can I open a custodial Roth IRA for a baby?
Yes, there's no minimum age. But the child needs earned income in the year you contribute, such as documented modeling or acting pay, and the contribution can't exceed what they earned. Without earned income there's nothing to contribute yet.
Can parents contribute to a child's Roth IRA?
Yes. A parent or grandparent can supply the dollars while the child keeps their pay. The total contributed for the year can't exceed the child's earned income or the annual limit, whichever is lower.
Does a custodial Roth IRA affect financial aid?
Retirement accounts, including a custodial Roth IRA, are generally not reported as an asset on the FAFSA, so the balance has little direct effect on aid. Withdrawals can count as income on a later form, so plan the timing.
What to do next
- Check whether your child had earned income this year, and how much.
- If not, look at a UTMA or 529 for now.
- If so, follow the step-by-step guide and start a simple log of the work and pay.
Written by Josh Ackerman
Founder of MemoryBank. A computer scientist and M.B.A. with 20+ years of investing and technology experience, Josh built the first MemoryBank in his basement so his three kids could watch their own accounts grow. More about Josh →
See it in one place
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Related guides
How to Open a Custodial Roth IRA for Your Kid (Step by Step)
From "my kid earned money this year" to a funded custodial Roth IRA, including how to set up automatic contributions safely.
Roth IRA for Grandchildren: How a Grandparent Can Fund One
Yes, you can fund a grandchild's Roth IRA, with conditions. Who can be custodian, how much can go in, and the gift-tax rules.
Custodial Roth IRA Rules and Contribution Limits (2026)
The earned-income rule, the 2026 limits, the deadline, and the withdrawal rules — one page.
MemoryBank is a display and education tool, not a financial advisor. Nothing here is investment, tax, or legal advice. Verify program details with the IRS, your tax advisor, or a licensed financial professional before making decisions.