Why Every Parent Should Consider a Roth IRA for Their Child

Why Every Parent Should Consider a Roth IRA for Their Child

As a parent, you should consider a Roth IRA for your child, as it can be a powerful tool for teaching financial responsibility and long-term investing. Parents can act as custodians, contributing up to the lesser of the child’s earned income or $7,000 annually, with contributions adhering to standard Roth IRA rules. Minors earning substantial income may need to file a tax return. For small business owners, paying their children a salary can allow them to contribute to a Roth IRA, provided the child is actually working for the business.

A Roth IRA can serve as an educational resource, introducing children to the concepts of investing and saving for retirement without impacting their eligibility for financial aid (FASFA). Once the child reaches the age of majority, they gain full control of the account, empowering them to continue managing their investments independently. This early start in financial literacy can pave the way for a secure financial future.

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Shawna Theriault, CFP®, CPA, CDFA®
Senior Financial Advisor, Wiser Wealth Management

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