Clear Money Guide
Guide and tool overview
See the questions covered here, then open the interactive utility.
Comparison tables scroll horizontally on smaller screens.
Updated August 2, 2026. Quick answer: a child can have a Roth IRA at any age — Publication 590-A answers the age question with “No. You can be any age.” — but only if they have compensation. That is the entire gate, and it is where most family plans fail: an allowance is not compensation, and neither is interest on the child’s own savings. The contribution is capped at the smaller of their earnings or $7,500 for 2026.
The calculator
What counts as compensation, and what does not
| Counts | Does not count |
|---|---|
| Wages, salaries, tips, professional fees, bonuses | An allowance or pocket money |
| Amounts received for providing personal services | Interest and dividend income |
| Net earnings from self-employment | Rental income and other earnings from property |
| Commissions | Pension or annuity income; deferred compensation |
Publication 590-A puts the exclusions in exactly those terms — “earnings and profits from property, such as rental income, interest income, and dividend income” are not compensation. Babysitting, lawn work, a summer job and genuine work in a family business all are. The distinction is whether the child provided services.
The cap is the smaller of two numbers
Publication 590-A: the most that can be contributed is generally the smaller of the dollar limit or “your taxable compensation … for the year”. For 2026 the dollar limit is $7,500, so a child who earned $2,000 can have $2,000 contributed — not $7,500. Almost every child is capped by earnings rather than by the limit, which is why the honest version of this strategy is small and repeated rather than large and one-off.
Whose money goes in
Parents and grandparents commonly fund the account while the child keeps what they earned. The publication sets the ceiling by reference to the child’s compensation; it does not require the contributed dollars to be the same dollars the child was paid. What it does require is that the compensation genuinely exist. Keep it that way round — the earnings are the fact that has to be real, and the funding is the easy part.
The account itself is a custodial Roth IRA: an adult controls it until the child reaches the age of majority under state law, at which point control passes to them completely. That is worth thinking about before it arrives, not after.
See how this fits the rest of your plan
Where money is saved changes what it costs you later, and an adviser can weigh this account against the rest of your savings before you commit to it.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide is paid when you submit the form, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here. You stay on this page.
What happens when you press the button
It asks about nine questions (age, investable assets, location), then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button. Submitting the form does not guarantee an adviser or a match. This matching form is not tax or legal advice.
If you own a business, there is a further step
Paying your own child for real work in your business creates the compensation this whole thing depends on, and the payroll treatment is unusually favourable — but only for a specific entity type, and that is where people go wrong.
“service performed by a child under the age of 18 in the employ of his father or mother” is excepted from employment for FICA purposes
IRC § 3121(b)(3)(A)
The IRS states the entity restriction directly: it applies where the child is employed in the parent’s sole proprietorship, or a partnership in which each partner is a parent of the child. If the business is a corporation — including an S corporation — or a partnership with any non-parent partner, the wages are subject to Social Security, Medicare and federal unemployment tax regardless of age. That single distinction is the most commonly repeated error in this area.
Federal unemployment tax has its own, different threshold: under IRC § 3306(c)(5) the exception runs to age 21, not 18. So a 19-year-old in a parent’s sole proprietorship is outside the FICA exception but still inside the FUTA one.
And the wages have to be real. The deduction standard is “a reasonable allowance for salaries or other compensation for personal services actually rendered” (IRC § 162(a)(1)). Work actually performed, at a rate you would pay a stranger, documented like any other employee. If you would not pay someone else that much for that work, do not pay your child that much for it.
If you are self-employed and setting this up, the retirement side of your own business is the natural companion: what a solo 401(k) lets you contribute.
Where this sits against the alternatives
A Roth for a child is the best retirement vehicle available to them and a poor education one. For education the 529 is the purpose-built answer, and it has become far more flexible: leftover 529 money can now be rolled into a Roth IRA under conditions, which narrows the old argument against overfunding one. What else can be done with a 529 that is not needed covers the rest.
If the goal is moving money to the next generation rather than funding a child’s retirement, the gift rules do it at a completely different scale — the annual exclusion and the couples arithmetic, and tuition paid directly to a school, which is unlimited and is not a gift at all.
Compensation definition, the smaller-of cap and the any-age answer from IRS Publication 590-A; the child-employment exceptions from IRC §§ 3121(b)(3)(A) and 3306(c)(5) with the entity restriction from the IRS Family Help guidance; the reasonable-wages standard from IRC § 162(a)(1). The $7,500 figure is the 2026 IRA limit. All read August 2026; limits are indexed and change annually. General information, not tax advice.