I'm thinking about my still-toddler boy, and trying to figure out how to help him get an income which would allow him to start contributing to a Roth IRA. I am aware that the value of such an IRA could negatively impact his qualification for financial aid for college.

Do you think this is a good focus for his finances at such a young age and if so, what creative ways can he obtain income which meets the qualifications for Roth contributions? My hope is that such long term tax-free compounding of gains will be a huge help for his retirement nest egg.

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    Retirement accounts are ignored by FAFSA rules, or so I thought. A student's IRA should not impact their grants/aid. (Unless someone knows otherwise) Commented Jul 13, 2013 at 18:27
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    Remember that earned income is required in order to contribute to an IRA. Also, many IRA custodians will not open IRA accounts for children under a specific age (can vary with custodian), so look into that as well. Finally, I hope that the compounding of gains will not make a huge dent in the child's retirement nest egg, but rather an extra bulge. :-) Commented Jul 13, 2013 at 19:20
  • @DilipSarwate - a recent Kiplinger article kiplinger.com/article/saving/… mentions TD Ameritrade, as well as the broker I use, Schwab, both ok with Kiddie Roths. You are right, there must be earned income, which I didn't address, just the FAFSA comment. Commented Jul 13, 2013 at 19:27
  • You want to avoid building wealth so you can get government money later? Commented Jan 26, 2015 at 21:53

1 Answer 1


It's a matter of keeping contemporaneous records for legitimate income. My daughter started baby sitting at age 11, and even then, was earning $10/hr. I told her that in exchange for keeping a notebook listing the date, name, time, and money earned, I'd make deposits to her account. It's important to note that the exact dollar earned doesn't have to be deposited, only that there's income greater than the deposit. It can come from savings or a gift.

The limit to deposit is $5500 in 2015 or the child's earned income, whichever is less. For a toddler, aside from modeling/acting, I don't know what earned income he might have. As he gets older, yard work in the summer or snow shoveling in the winter can both add up fast.

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    I used to shovel/snowthrow driveways, walks, even streets (right in front of a neighbor's house so they could park next to the curb). If I'd been smart, those $20 a pop times 4-6 houses per storm times 3-4 storms a month would've added right up
    – warren
    Commented Jul 14, 2013 at 0:11
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    I found that promising a child that any of the earned money he/she chooses to deposit into an IRA (instead of spending it in chocolates or toys etc) would be replaced (by me) so that their spending power would not be diminished led to all the income going into an IRA. More importantly, when the children reached adulthood and this program of Dad's philanthropy ceased, the habit of funding the IRA first continued. It is always helpful to have the child look at the IRA account balance regularly to observe the "power of compounding": works much better than bar graphs and the like! Commented Jul 14, 2013 at 4:13

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