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A working teenager can open a Roth IRA and turn babysitting money into $1M+ by retirement — completely tax-free.
A Roth IRA funded during teenage years is arguably the single best financial gift you can give your child. Tax-free growth for 50+ years turns small contributions into massive wealth.
$7,000
Max Contribution
Or earned income (whichever is less)
$1.2M
$2K/yr for 5 Years
By age 65 at 10% growth
$0
Tax on Withdrawal
Completely tax-free at 59½
$2,000/year Ages 14-18, Then $0 (10% avg return)
Max Contribution = Lesser of $7,000 or Total Earned Income
Child must have earned income from work (not allowance or gifts)
Must Have Earned Income
Babysitting, lawn mowing, lifeguarding, tutoring — any legitimate work.
No Minimum Age
A 13-year-old earning $3,000 babysitting can contribute up to $3,000.
Parent Manages Until 18
Custodial Roth IRA held in parent's name, transfers at age of majority.
Parent Can Fund It
You can give your child the contribution money — they just need matching earned income.
The Parent Match Strategy
Which Account to Use?
| Feature | Custodial Roth IRA | Custodial Brokerage |
|---|---|---|
| Tax on Growth | Tax-FREE forever | Taxed annually |
| Requires Income? | Yes (earned only) | No |
| Withdrawal Flexibility | Contributions anytime* | Full access at 18/21 |
| Max Contribution | $7,000/year | Unlimited (gift tax rules) |
| Best For | Long-term retirement wealth | Medium-term goals |
| FAFSA Impact | Not reported | Student asset (20%) |
Babysitting/Pet Sitting
Self-employment income. Keep records of dates and amounts earned.
Lawn Care/Snow Removal
Neighborhood jobs count. Document with a simple log.
Part-Time W-2 Job
Retail, food service, lifeguarding. Easiest to document with W-2.
Family Business
Working in parent's business at reasonable wages. Must be real work.
Tutoring/Teaching
Helping younger students with homework or music lessons.
Online Freelancing
Graphic design, coding, content creation — all qualify.
What Doesn't Count
Key Takeaways