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Surprise! Your Child Can Build a Million-Dollar Roth IRA Before Retirement.

Your child may not have access to employer-sponsored benefits like a 401(k) plan or an employee stock purchase plan (ESPP) yet, but that doesn’t mean they can’t start planning for their future. If your child is working a paid summer internship or making money during the year, you can consider opening a Roth IRA for them. Anyone, regardless of age, can contribute money to a Roth IRA as long as they meet the requirements.

We’ve compiled a few steps you can take this year to set your child up for a millionaire retirement.

Child interacting on computer with other people.

Image source: Getty Images.

1. Understand the requirements

Although age is not a factor for determining Roth IRA eligibility, your child will however need to check the box on earned income. Your child can earn income from a job or business, such as working a paid summer internship or dog walking in your community, as long as it is properly documented.

Since minors cannot open an IRA (individual retirement account) on their own, you or another family member will need to open a custodial Roth IRA on their behalf. To get started, you can research custodial Roth IRAs at different financial institutions and look for the best options in terms of fees and customer service. As the custodian, you’ll manage the account until your child reaches the age of majority, which is typically 18 or 21 depending on the state.

If you want to make sure your child’s income qualifies and that you’re following all the rules, reach out to a Certified Public Accountant who is experienced in this area or another knowledgeable financial professional.

2. Make the most of contributions

The maximum amount you can contribute to a child’s custodial Roth IRA in 2024 is $7,000. If your child’s income is less than that, their contribution will be capped at their earned income. For example, if your 17-year-old daughter earns $5,400 from a summer internship in 2024 and doesn’t work the rest of the year, her contribution limit for 2024 would be $5,400. With a Roth IRA, your child will make after-tax contributions today, while they are typically in a lower tax bracket, and enjoy tax-free income during retirement.

After determining how much your child can contribute for the year, find a way to get them involved in the savings process and potentially match their contribution. For example, if your child can contribute $5,400 to the account, they could save $2,700, which they could break down into weekly or monthly contributions, and you could contribute the remaining $2,700 to motivate them to reach their savings goals.

Although your child isn’t required to contribute to a Roth IRA every year, maximizing contributions annually can help them get closer to a million-dollar Roth IRA. Once your child’s income exceeds the annual threshold, they will no longer be able to make direct contributions to a Roth IRA and will need to find alternative ways to fund the account.

3. Show your child the power of compounding

Simply contributing the max to a Roth IRA isn’t enough to reach the million dollar mark. If your child contributed $7,000 annually to a Roth IRA for 60 years, that would still only be $420,000 worth of contributions. Investing is the secret sauce that can potentially turn $7,000 worth of annual contributions into a million-dollar Roth IRA. It’s also a valuable skill that will teach your child how to do research, analyze different companies, and make informed decisions.

To keep your child motivated on this journey, show them how their money can grow over time if they get started today. Below, you’ll see how $7,000 invested annually can grow over four decades if their money generates an 8% or 10% return.

$7,000 Invested Annually For:

Growing at 8%

Growing at 10%

10 years



20 years



30 years



40 years



Data source: Author calculations.

Your child’s million-dollar Roth IRA game plan

The earlier you set your child up with a Roth IRA, the better their chances of building a million-dollar Roth IRA. The key is to get them involved and teach them how investing works so they can continue these habits when they take control of the account. Even if they don’t hit the million-dollar mark in a Roth IRA alone, the knowledge and training they gain now will teach them how to maximize different accounts, setting them up for long-term financial success.

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