Can you open a Roth IRA for your kids? Sure.
There are a few requirements, but if your child qualifies, it can be a fantastic investment account for your kids.
Roth IRAs offer tax free growth on the contributions, making it a very attractive investment vehicle for young investors that can take advantage of decades of compounding.
Requirements for a Roth IRA for Kids
Minimum Age:
None. Your child can open a Roth IRA at any age as long as he meets the income requirements.
Income Requirements:
Your child must have taxable earned income to contribute to a Roth IRA. Income from a summer job qualifies, but investment income, like interest and dividends, does not qualify.
Contribution Limits:
The yearly Roth IRA contribution limit is the lower of their taxable earned income for the year or the maximum contribution limit of $5,000 in 2010.
Funding:
Even though your child must have earned income reported on the child's tax return, he does not have to contribute the money to the Roth IRA; you can fund the Roth IRA with your own money.