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
None. Your child can open a Roth IRA
at any age as long as he meets the 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.
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.
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.