Roth IRA for Children
If your child has taxable earned income and qualifies, a Roth IRA can be a great way to get them started on investing for retirement. This is the case for several reasons.
Like Roths for adults, money in a Roth IRA for children grows tax free. Since the majority of kids have very low earned incomes, they’re probably paying little or no taxes on that income anyway. In that case, a Roth can be even more beneficial because it’s likely that most or ALL of the money added to the Roth will be tax free.
Keep in mind though that money in your kid’s IRA is their money. You can’t legally force them to use it only for retirement.
The only catch with opening a Roth for children is that there aren’t very many brokerages that allow you to do so. I don’t know if that’s because the number of people who want to open Roths for kids is low, or if there’s some other reason that makes brokerages shy away from offering them.
You may have to do a little searching around, but I was able to open one for my son at Scottrade though while he was a minor, so there are definitely some places you can open one. You’ll just need to ask if they allow people to open a Roth IRA for kids.
Once you find a broker you’d like to go with and get the IRA opened, you can use it as an opportunity to teach your children the value of saving for retirement — and of not touching that money until retirement.