Page 1: What Is a Roth IRA and Why Should Teens Care?
A Roth IRA is a special savings account for retirement. But here’s the cool part—your teen can start one even before they’re out of high school. If your teenager has a summer job, this is the perfect time to think about their future. Setting up a Roth IRA for your teen with summer job income helps them build wealth early and learn smart money habits.
When your teen earns money—like working at a grocery store, babysitting, or mowing lawns—they can use that earned income to put money into a Roth IRA. The government says your child must have earned income to open one. That means they must work for it, not get it from gifts or allowance.
Let’s say your teen earns $2,000 one summer. They can put up to $2,000 into their Roth IRA that year. They don’t have to use all of it, but even a small amount—like $500—can grow into thousands of dollars by the time they’re adults.
Why start early? Time is powerful. If your teen starts saving now, that money has many years to grow with something called compound interest. That means they earn money on the money they’ve saved and on the interest it makes.
Page 2: How to Set Up a Roth IRA for Your Teen
Now, let’s walk through the steps of setting up a Roth IRA for your teen with summer job income in 2025.
Step 1: Make Sure They Have Earned Income
First, your teen must have a job. This could be anything from working at a fast-food place to doing freelance work like dog walking. You’ll want to keep records of what they earn, like pay stubs or invoices.
Step 2: Choose a Custodial Roth IRA
Because your teen is under 18, they can’t open a Roth IRA by themselves. Instead, you’ll need to help them open a custodial Roth IRA. That means the account is in their name, but you (the parent or guardian) manage it until they’re old enough.
Many places offer custodial Roth IRAs, like:
- Fidelity
- Charles Schwab
- Vanguard
These are called brokerages—companies that help you invest money.
Step 3: Pick Your Investments
Once the account is open, you help your teen decide how to invest the money. Roth IRAs don’t just hold cash—they hold investments, like stocks, mutual funds, or index funds. A good beginner choice is something called a “target-date fund,” which adjusts as your teen gets older.
Step 4: Make Contributions
In 2025, the maximum Roth IRA contribution is $7,000, but your teen can only contribute up to what they earned. So if they made $1,200 working at a smoothie shop, they can put in up to $1,200.
Even if you, the parent, gift them the money to contribute, it’s still allowed—as long as their total contribution doesn’t go over their earned income.
Page 3: Benefits and Long-Term Power of a Roth IRA for Teens
Setting up a Roth IRA for your teen with summer job income does more than just save for retirement—it teaches big life lessons. It shows them how to save, plan, and think about the future.
Tax-Free Growth
One of the best parts of a Roth IRA is that the money grows tax-free. That means your teen pays no tax on the money they make from their investments—ever, as long as they follow the rules.
Withdrawals: When Can They Use It?
Your teen can’t touch the money until they’re 59½ without paying a penalty, except in special cases like buying their first home or paying for school. But the original money they put in (called contributions) can be taken out anytime, with no tax or penalty. Still, it’s best to leave it alone so it grows over time.
Long-Term Example
Let’s say your teen puts $1,000 into a Roth IRA at age 16. If they never add another dime, and the account earns an average of 8% a year, that money could grow to over $16,000 by the time they’re 60. Now imagine they add $1,000 every summer—suddenly, they could be looking at hundreds of thousands of dollars by retirement.
Final Thoughts: Why You Should Start Now
In 2025, there are many ways for teens to earn money and start building a future. Setting up a Roth IRA for your teen with summer job income helps them grow their savings while learning how investing works. It’s simple, smart, and it gives them a big head start.
Whether your teen wants to be a doctor, artist, or business owner, this is one gift that keeps on giving. The earlier they begin, the better their financial future can be.
