A Retirement Account for a Grandchild Starts With a Summer Job

Want to give a grandchild a financial head start that could last a lifetime? The first step might not be writing a check.

It might be getting them a summer job.

You can open a custodial Roth IRA for a child, allowing money invested while they are young to potentially grow tax-free for decades. But there is one important requirement: The child must have earned income.

That means grandparents generally can’t open a Roth IRA for a newborn and start depositing money simply to take advantage of decades of compound growth. The child first needs legitimate work earnings.

The amount you can contribute is limited, too.

For 2026, the IRA contribution limit is $7,500, but a child can contribute only up to the amount of earned income received during the year.

So if a granddaughter earns $900 mowing lawns over the summer, she can contribute up to $900 to her Roth IRA. She cannot contribute the full $7,500 just because that is the annual IRA limit.

Here’s the part grandparents may find especially useful: The contribution does not necessarily have to come from the money the child earned.

If that granddaughter earns $900, she could keep her $900 to spend or save. A parent, grandparent, or someone else could provide another $900 to fund her Roth IRA.

The important requirement is that she actually earned at least as much income as the amount contributed.

And earned income doesn’t necessarily require a traditional job with a paycheck and W-2.

Babysitting, lawn mowing, pet sitting, and similar work can count as self-employment income. That makes good recordkeeping important. Families should keep a simple record showing what work was performed, when it was done, who paid, and how much the child received.

Open a custodial Roth IRA in the child’s name and Social Security number, with an adult managing the account until the child reaches the age when control must be transferred under applicable state law.

For a grandparent, that creates an interesting opportunity.

Instead of simply handing a teenager $500 or $1,000, you can effectively reward work twice: Let the grandchild keep the money earned from that summer job while you match some or all of those earnings with a contribution to a Roth IRA.

The child gets money today—and an investment in retirement that could grow for decades.

For grandchildren who are still too young to earn income, however, a Roth IRA will have to wait.

That first retirement contribution may begin with something much simpler:

A lawn mower, a babysitting job, or that first summer paycheck.