Just tips:
Any child with income earned from a job, babysitting, or mowing lawns can have a custodial Roth IRA, and you can contribute whatever they earned, up to the annual IRA limit. Money invested in 15 has half a century to compound tax-free. Open it the first summer your child earns a salary.
Mathematics is the whole argument. A single contribution of $1,000 at age 15 grows to roughly $29,000 by age 65 at an average annual return of 7%, and because it’s a Roth, every dollar of that growth comes out tax-free.
Most parents miss the best part. The contribution does not have to come from your child’s pocket. The IRS only requires that the child have income for the year. The money itself can come from anyone. Run it like an employer match. Your teen keeps the paycheck and you contribute a matching amount to the Roth, limited to what they actually earned or the annual IRA limit, whichever is less.
Earned income is the keeper and is broader than a W-2. Formal jobs count, but so does self-employment income from babysitting, lawn mowing or tutoring. Help and birthday money do not. For informal work, keep a simple record of dates, payees, and amounts in case the IRS ever asks.
Opening an account takes about 15 minutes at most major brokerages, with no account fees or minimums. You manage the account as custodian until your child reaches the age of majority, usually 18 to 21 depending on your state, when a regular Roth is made in their name. Put the money into a broad, low-cost index fund, rather than leaving it in cash. The long runway is all the advantage and the cash squanders it. If plans change, contributions can be returned at any time without tax or penalty. Only the income should stay put until retirement.
A summer of mowing lawns will not make your child rich. Starting the composition clock at 15 instead of 25 may.
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