Minor Roth IRA

Have you every heard about a minor Roth IRA or a child Roth IRA?

Here are some reasons why other people consider a Roth for their kids.

• Build the habit of saving. Saving is a habit. Once your kids get in the habit, they may not miss the money. Moreover, the savings will give them options in the future. It will give them flexibility throughout their lives. Therefore, opening a Roth IRA account may be a good opportunity for your minor kids to experience many investment options and learn how to invest.


• Power of compound interest. A Roth IRA account grows tax-free. One of the secrets of the rich is long-term investments that pay compound interest. With a Roth account, you can reinvest not only interests but also unpaid taxes. The longer the money stays in a Roth account, the bigger it will grow.


• Potential tax saving. To be eligible for a Roth IRA, your kids need to earn income. If you hire your kids under age 18 as a part-time employee of your business, the wages for them may be exempt from payroll taxes and you may deduct the wages as a business expense. For details, you need to consult with your tax professional.


• Flexible Money Management. The annual Roth IRA contribution dollars can be withdrawn at any time completely tax-free. For earnings to be tax-free, the withdrawals should be qualified distributions. Therefore, your kids may have a great flexibility in using the money. When they go to college, for example, they may use the savings for their college fund.

Opening a Roth IRA for your children is not difficult. Most financial institutions will help you whenever you need. However, keep in mind that your kids should have earned income and you need to prove it with supporting documents such as a W-2 form.