The obstacle is almost never the money.
A custodial Roth IRA can be opened for a child at any age, and the money inside grows tax free for decades. But the IRS requires earned income for any IRA and makes no exception for children. The grandchild has to have worked and been paid for it.
That rules out newborns, whatever the compounding charts suggest. It also caps the contribution lower than most people expect. The limit is $7,500 for 2026 or the child's earned income for the year, whichever is less. A granddaughter who cleared $900 mowing lawns can have $900 put away, not $7,500.
Here is the part most people miss. The dollars do not have to be hers. The IRS asks only that she earned at least as much as the contribution. The money itself can come from a parent, a grandparent, or anyone else. She keeps the $900 she worked for, and you put $900 in the account.
What counts as earned income is broader than a paycheck. According to Fidelity, babysitting, pet sitting, and lawn mowing all qualify as self-employment. None of it produces a W-2, so somebody has to keep a plain record: dates, hours, who paid, how much.
You do not need to be a guardian to serve as custodian. Any adult can. The account is opened under the child's name and Social Security number, so a parent will be involved either way, and control passes to the child at an age set by state law, most often 21.
For grandchildren still too young to work, a Trump Account is the one that asks for no job at all.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.
