A Roth IRA can be a great investment option for kids, as it offers tax-free growth and withdrawals in retirement. Your money doubles every eight years, assuming an 8% rate of return. Combine this with starting your child’s Roth IRA early, and they have a substantial amount for their retirement after age 59.

Things to remember:
– Your child must provide and be paid for a bona fide service
– There must be an employer/employee relationship, a third party needs to be paying your child for said bona fide service, not directly from their parents
– They must be paid a reasonable amount for the service they’re providing

Teaching your child to save in a Roth IRA is a great way to teach them about finances and get them in the habit of saving money for their retirement.

If you’re interested in setting up one for your child, IRA Financial will set up a Self-Directed Roth IRA for children of existing clients for free until they reach the age of 18. Reach out to our amazing tax professionals to learn more!

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About IRA Financial:

IRA Financial was founded by Adam Bergman, a former tax and ERISA attorney who worked at some of the largest law firms. During his years of practice, he noticed that many of his clients were not even aware that they can use an IRA or 401(k) plan to make alternative asset investments, such as real estate. He created IRA Financial to help educate retirement account holders about the benefits of self-directed retirement plan solutions.

IRA Financial is a retirement account facilitator, document filing, and do-it yourself document service, not a law firm. IRA Financial Group does not provide legal services. No attorney-client relationship exists between Client and IRA Financial, its management, salespersons or IRA Financial’s in-house legal counsel. IRA Financial Group provides IRA retirement facilitation service and CANNOT provide Client with legal, investment, or financial advice. Prior to making any investment decisions, please consult with the appropriate legal, tax, and investment professionals for advice.

IRA Financial is not engaged in rendering legal, accounting or other professional services. If legal advice or other professional assistance is required, the services of a competent professional person should be sought. (From a Declaration of Principles jointly adopted by a Committee of the American Bar Association & a Committee of Publishers and Associations.). The scope of Professional Services does not include the costs of any custodian related services.

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If you want to give your child a great head start on their financial future, opening a Roth IRA for them is a smart move. Not only will it allow your child to start saving for retirement early, but it will also teach them important lessons about money and financial responsibility.

Here are the steps you need to follow to start a Roth IRA for your child.

Step 1: Determine if your child is eligible to contribute to a Roth IRA

To contribute to a Roth IRA, your child must have earned income. This could come from a part-time job, summer job or babysitting gig. The maximum amount they can contribute in 2021 is $6,000 or their earned income, whichever is less.

Step 2: Choose a custodian for the account

Once you’ve determined that your child is eligible to contribute to a Roth IRA, you’ll need to choose a custodian to hold the account. This could be a bank, credit union, broker or investment company. Make sure you do your research to find a custodian that offers low fees and investment options that align with your child’s financial goals.

Step 3: Complete the paperwork

To open a Roth IRA for your child, you’ll need to fill out the necessary paperwork. This will include an application, beneficiary designation form and disclosure statement. Make sure you read the fine print carefully and fully understand the terms and conditions of the account.

Step 4: Choose investments

One of the advantages of a Roth IRA is that it allows your child to invest in a range of options, including stocks, mutual funds and exchange-traded funds (ETFs). You’ll need to choose investments that are appropriate for your child’s age and risk tolerance. If you’re not sure where to start, consider working with a financial advisor who can help you make informed decisions.

Step 5: Consistently contribute to the account

To make the most of a Roth IRA, it’s important to consistently contribute to the account. Encourage your child to set aside a portion of their earnings each year and contribute it to their Roth IRA. This will help them build a healthy retirement nest egg and develop good savings habits.

Opening a Roth IRA for your child is a smart investment in their financial future. By following these steps, you can help your child start saving for retirement early and teach them valuable lessons about money management along the way.