Money Girl Roth IRA Rules for Minors–How to Make Kids Millionaires (Reissue)
Nov 28, 2025
Discover how to set up a Roth IRA for your kids and make them potential millionaires! Learn the difference between W-2 and 1099 payments for young workers and why after-tax accounts are perfect for minors. Explore what qualifies as earned income and when your child needs to file taxes. Laura provides valuable advice on documentation and consulting a CPA for payroll issues. Plus, hear how early contributions can lead to significant long-term growth. Great tips for parents looking to secure their kids' financial future!
AI Snips
Chapters
Transcript
Episode notes
Listener Tony's Roth IRA Question
- Tony called to ask whether scholarship and $1,200 pay to his college daughter needed reporting and a 1099.
- His daughter contributed that $1,200 to a Roth IRA after he paid her for work in his business.
Pay Kids As Employees, Not Contractors
- Treat working children as employees and issue W-2s so their pay counts as earned income for Roth IRA eligibility.
- Withhold required income taxes and follow payroll rules based on your business entity to avoid audit risk.
Why Roth IRAs Suit Kids Perfectly
- Roth IRAs are ideal for kids because contributions grow tax-free and kids usually don't need deductions.
- Contributions (not earnings) can be withdrawn anytime, offering flexibility for future expenses.