Where to start a child's Roth IRA with very low income?

[MDM]

There have been a number of good posts about starting Roth IRAs for one's children, e.g. http://the-military-guide.com/2014/05/15/start-a-roth-ira-for-your-kid/ by Nords.  As far as I can tell, however, all of them assume (either explicitly or implicitly) the child has more than $1,000 to invest.

Has anyone found a good no (or very low) startup and ongoing fee place that would take a child's Roth IRA with only ~$100? 

Some of the usual suspects don't work: Vanguard and Schwab have a $1,000 minimum, Fidelity and TD Ameritrade don't do <18 years old, local credit union doesn't do Roth IRAs, etc.

If all we can get now are CD-like rates, when eligible we would move the account to Vanguard/Fidelity/Schwab for access to better investments.  That means we want no (or very low) closing fee as well.

Thanks.

[GGNoob]

You can always do a brokerage account at Vanguard and buy ETFs. There is no minimum then. However, you'll have to buy whole shares. Schwab may work better because most of the ETFs are cheaper there (share price).

Else you could try to get an account at Wisebanyan. It's in beta but if you refer like 5 people you'll get an invite. It's like Betterment but no advisor fees.


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[MDM]

You can always do a brokerage account at Vanguard and buy ETFs. There is no minimum then. However, you'll have to buy whole shares. Schwab may work better because most of the ETFs are cheaper there (share price).

Else you could try to get an account at Wisebanyan. It's in beta but if you refer like 5 people you'll get an invite. It's like Betterment but no advisor fees.

Thanks for the ideas.  Unfortunately...
  - Both the Vanguard website and a Vanguard rep on the phone both say that won't work with only $100.
  - The Schwab website says there is a $1,000 minimum.
  - The WiseBanyan website says "In order to open a WiseBanyan account, a client must be over 18 years of age" so no joy there.

[GGNoob]

You can always do a brokerage account at Vanguard and buy ETFs. There is no minimum then. However, you'll have to buy whole shares. Schwab may work better because most of the ETFs are cheaper there (share price).

Else you could try to get an account at Wisebanyan. It's in beta but if you refer like 5 people you'll get an invite. It's like Betterment but no advisor fees.

Thanks for the ideas.  Unfortunately...
  - Both the Vanguard website and a Vanguard rep on the phone both say that won't work with only $100.
  - The Schwab website says there is a $1,000 minimum.
  - The WiseBanyan website says "In order to open a WiseBanyan account, a client must be over 18 years of age" so no joy there.

While I didn't look up Schwab or Wisebanyan, I do have an email from Vanguard that says there is no minimum for a brokerage account anymore. So that's odd.

This link is old, but may be worth checking out:  http://m.kiplinger.com/article/saving/T046-C001-S001-roth-iras-for-kids.html

It talks about TD Ameritrade and I was going to mention that anyhow as you can open an account with no minimum balance.


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[MDM]

While I didn't look up Schwab or Wisebanyan, I do have an email from Vanguard that says there is no minimum for a brokerage account anymore. So that's odd.

This link is old, but may be worth checking out:  http://m.kiplinger.com/article/saving/T046-C001-S001-roth-iras-for-kids.html

It talks about TD Ameritrade and I was going to mention that anyhow as you can open an account with no minimum balance.

Thanks for the Kiplinger link.  It sure does say "TD Ameritrade offers IRAs for minors with no investment minimums or annual fees."  That would be great.  But the TD Ameritrade site says "Age Requirements: It varies by state, but the majority requires you to be 18 years of age. A select few do require you to be 19 to start an IRA. You should check the legal requirement in your state." 

I'm hoping that someone will be able to say "despite what it says on the _______web site, you can do what you want (open a no-fee Roth IRA for a minor using only $100) by ___________."

[Gin1984]

My credit union allowed me to open a Roth IRA with $25, but it was just a savings account.  However, I was able to drip and dribble in the money until I had enough to move to fidelity.  Otherwise, check capital 1 360.  I opened an account with them when they were giving $50 for depositing $200, again in a Roth IRA and savings account.  It is odd though, I have never heard a state requirement about being 18-19 for a Roth.

[seattlecyclone]

Why not keep the money in a savings account until you have $1,000? The investment growth on that $100 while you save up an additional $900 isn't going to be that significant in the grand scheme of things.

[MDM]

My credit union allowed me to open a Roth IRA with $25, but it was just a savings account.  However, I was able to drip and dribble in the money until I had enough to move to fidelity.  Otherwise, check capital 1 360.  I opened an account with them when they were giving $50 for depositing $200, again in a Roth IRA and savings account.  It is odd though, I have never heard a state requirement about being 18-19 for a Roth.

I thought our CU would do so, but they said no.  Thanks for the capital 1 360 idea: a 25% bonus would be nice.

Why not keep the money in a savings account until you have $1,000? The investment growth on that $100 while you save up an additional $900 isn't going to be that significant in the grand scheme of things.

That is in fact the status quo.  The main point is to instill in the 13 year old mind that "of course I should put my earned income into a Roth IRA while I'm earning it tax free - doesn't everyone?" and have this carry forward throughout life.  The actual investment return on the $100 is secondary.

[GGNoob]

What about this? http://www.schwab.com/public/schwab/investing/accounts_products/accounts/ira/custodial_ira

It clearly says $100 minimum and even says it again here: http://www.schwab.com/public/file/P-1036363/REG23060-24_FINAL.pdf

[MDM]

What about this? http://www.schwab.com/public/schwab/investing/accounts_products/accounts/ira/custodial_ira

It clearly says $100 minimum and even says it again here: http://www.schwab.com/public/file/P-1036363/REG23060-24_FINAL.pdf

Best lead I've seen yet!  Thanks - will advise if successful.

[MDM]

Speaking of Schwab...and Nords...: http://thefinancebuff.com/best-broker-for-a-custodial-ira-for-your-kids.html

Key word is "Custodial".  Add that to "Roth IRA" and Google finds multiple relevant sites.  Thanks again Logan T.

[juuustin]

My credit union allowed me to open a Roth IRA with $25, but it was just a savings account.  However, I was able to drip and dribble in the money until I had enough to move to fidelity.  Otherwise, check capital 1 360.  I opened an account with them when they were giving $50 for depositing $200, again in a Roth IRA and savings account.  It is odd though, I have never heard a state requirement about being 18-19 for a Roth.

I thought our CU would do so, but they said no.  Thanks for the capital 1 360 idea: a 25% bonus would be nice.

Why not keep the money in a savings account until you have $1,000? The investment growth on that $100 while you save up an additional $900 isn't going to be that significant in the grand scheme of things.

That is in fact the status quo.  The main point is to instill in the 13 year old mind that "of course I should put my earned income into a Roth IRA while I'm earning it tax free - doesn't everyone?" and have this carry forward throughout life.  The actual investment return on the $100 is secondary.

Why not just use a little 'creative parenting' and 'set-up' the Roth IRA for your child but continue to funnel the money into a savings account until s/he has $1,000??  I doubt a child that age is going to want to pull his quarterly statements and analyze his $4 in earnings.  Once he hits $1,000, open the Roth, discuss his portfolio, and give him more control if he desires it.

[MDM]

Why not just use a little 'creative parenting' and 'set-up' the Roth IRA for your child but continue to funnel the money into a savings account until s/he has $1,000??  I doubt a child that age is going to want to pull his quarterly statements and analyze his $4 in earnings.  Once he hits $1,000, open the Roth, discuss his portfolio, and give him more control if he desires it.

Thanks for the suggestion - yes, I agree completely about the $4 earnings being uninteresting.  What you describe is certainly a defensible approach, particularly if one wants to put the funds in a place with a $1,000 minimum.  One caveat is the $1,000 would have to be earned in a single year, or in consecutive years if one remembers to fund the Roth between 1-Jan and 15-Apr of the 2nd year, designating part for year 1 and the rest for year 2.  Any earned income not placed into the real Roth by April 15 of the subsequent year is ineligible for future Roth use.

The quantitative advantage of doing a real Roth now is that all earned income (up to the annual limit) can go into the Roth and have tax free growth forever (or until tax laws change).  Yes, if that is only $100/yr for a few years then the total dollar amount would be small and perhaps not worth the trouble.  We're expecting somewhat higher amounts in coming years, however, so starting now on the right path (and the qualitative advantage of establishing the mindset) seems worthwhile.

We sent paperwork to Schwab to establish a custodial IRA - haven't heard back yet but it has been only a couple of days.

One adder: my intent is to follow the strategy outline here: http://www.cbsnews.com/news/kids-and-money-start-them-early-with-a-family-401k/.  While the dollar amounts are small, he gets to keep them and I'll fund the Roth for him.  The IRS doesn't care about the fund source, just that the amount is not greater than his earned income.  Eventually (as we already do with his older siblings) I'll match Roth contributions 1-for-1 so he (and they) have "skin in the game."

[Gin1984]

Why not just use a little 'creative parenting' and 'set-up' the Roth IRA for your child but continue to funnel the money into a savings account until s/he has $1,000??  I doubt a child that age is going to want to pull his quarterly statements and analyze his $4 in earnings.  Once he hits $1,000, open the Roth, discuss his portfolio, and give him more control if he desires it.

Thanks for the suggestion - yes, I agree completely about the $4 earnings being uninteresting.  What you describe is certainly a defensible approach, particularly if one wants to put the funds in a place with a $1,000 minimum.  One caveat is the $1,000 would have to be earned in a single year, or in consecutive years if one remembers to fund the Roth between 1-Jan and 15-Apr of the 2nd year, designating part for year 1 and the rest for year 2.  Any earned income not placed into the real Roth by April 15 of the subsequent year is ineligible for future Roth use.

The quantitative advantage of doing a real Roth now is that all earned income (up to the annual limit) can go into the Roth and have tax free growth forever (or until tax laws change).  Yes, if that is only $100/yr for a few years then the total dollar amount would be small and perhaps not worth the trouble.  We're expecting somewhat higher amounts in coming years, however, so starting now on the right path (and the qualitative advantage of establishing the mindset) seems worthwhile.

We sent paperwork to Schwab to establish a custodial IRA - haven't heard back yet but it has been only a couple of days.

One adder: my intent is to follow the strategy outline here: http://www.cbsnews.com/news/kids-and-money-start-them-early-with-a-family-401k/.  While the dollar amounts are small, he gets to keep them and I'll fund the Roth for him.  The IRS doesn't care about the fund source, just that the amount is not greater than his earned income.  Eventually (as we already do with his older siblings) I'll match Roth contributions 1-for-1 so he (and they) have "skin in the game."

I like the idea and plan to steal it!  :)

[Nords]

There have been a number of good posts about starting Roth IRAs for one's children, e.g. http://the-military-guide.com/2014/05/15/start-a-roth-ira-for-your-kid/ by Nords.  As far as I can tell, however, all of them assume (either explicitly or implicitly) the child has more than $1,000 to invest.

Has anyone found a good no (or very low) startup and ongoing fee place that would take a child's Roth IRA with only ~$100? 

One more option would be to make two tax years' worth of contributions during the period between 1 January -15 April.  That's how we made the original $1000 hurdle.

For example next year on 2 January you could contribute the 2014 earnings (whatever they may be) as well as the 2015 projected earnings.  Two years' worth of $500 each would make the $1000 minimum, or smaller amounts might work at banks/credit unions for their CDs.

The key is making sure that by 15 April 2016 (the end of the contribution period for tax year 2015) your child has earned at least as much as you projected in the January 2015 contribution.

Once again, unless you're egregiously abusing the contributions, I doubt that the IRS will show up asking to see paycheck stubs and work product.  If you give your child an allowance for doing chores, then in the eyes of the IRS that's income from family employment.  You might be doing it just to teach your kid how to manage money, and chores might be just what you do as part of the family, but if you're willing to declare the income on a tax form then you can contribute it to an IRA.

If your infant posed for baby photos, though, I'd make sure that the payment reflected whatever photographers are paying for baby models.  $5500 for an afternoon of poses, no matter how hard it may be on the parent or the photographer or the infant, might quirk an auditor's eyebrow.

[secondcor521]

I opened a custodial Roth IRA for my 13 year old son approximately one year ago at Charles Schwab with a $300 check from me.  He had lawn mowing income.  There were zero fees to open and fund the account.  I think there was a modest brokerage fee ($8 or $9 maybe) when he bought his 3 shares of NKE at $73 on 4/22 this year.  (He got his stock picking skills from his mother...Nike closed at $97ish today.)

[MDM]

We sent paperwork to Schwab to establish a custodial IRA - haven't heard back yet but it has been only a couple of days.

Everything went smoothly.  Bought one share each of several ETFs for no fee and left $0.16 cash in the account.  No hesitation in recommending Schwab for this activity.

[Miami Al]

When I first openned my Schwab IRA, it was openned with zero.  Many moons ago, you needed to have the account open by 12/31/XXXX even though you had until 4/15/XXXX+1 to fund it.

In fact, I had to pay annual fees for the first few years because the IRA contribution limits were lower.

I don't recall if it was Roth or Traditional.

But I'd fill out the paperwork, send in a check for $100, and see what happens.  Worst case, they mail the paperwork back to you.

[MDM]

Heard a Clark Howard segment today.  Caller had a 16 year old who wanted "stocks for Christmas."  Caller wanted a good way to make small investments for low cost.

Lo and behold, Clark suggested...a Schwab Custodial account using no-fee ETFs.  Don't recall if he specifically mentioned a Custodial Roth IRA but close enough.  He did mention the $100 minimum, no purchase fee, and low expense ratio.

Still the best deal out there AFAIK.

[milliemchi]

I started my daughter at Vanguard with a Roth IRA this year. There was paperwork involved because she is a minor, but there is no minimum to open the account. Currently, she has ~$40 sitting in a settlement account, and ETFs start at $50-60 per share, so we're close. The brokerage account comes standard with the Roth IRA. The minimums for mutual funds are $1-3000, but we will use ETFs until she has more money.  I plan on starting with bond ETFs, so that I can show her how income is generated more easily.

[Rubic]

MDM (and others):

Just a note to say I applaud your efforts to instill savings/investment discipline in your children at an early age.  I'm attempting to do the same with my nieces and nephews.  Good job.

[MDM]

I started my daughter at Vanguard with a Roth IRA this year. There was paperwork involved because she is a minor, but there is no minimum to open the account. Currently, she has ~$40 sitting in a settlement account, and ETFs start at $50-60 per share, so we're close. The brokerage account comes standard with the Roth IRA. The minimums for mutual funds are $1-3000, but we will use ETFs until she has more money.  I plan on starting with bond ETFs, so that I can show her how income is generated more easily.

Good for you (and your daughter)!

Also good to know that this is possible with Vanguard.  Perhaps someone needs to tell that to Vanguard's customer service reps - we were told "no can do" when trying this for our son. 

The Vanguard web site itself seems to have contradictory information.  At https://investor.vanguard.com/etf/fees we find

When you open your Vanguard Brokerage Account, you'll initially need to add at least $3,000 to your settlement fund.

But at https://investor.vanguard.com/stocks/how-to-invest-in-stocks there is

There's no minimum investment for your money market settlement fund.
There's no minimum initial investment for stocks and ETFs—it's the price per share.

[milliemchi]

Also good to know that this is possible with Vanguard.  Perhaps someone needs to tell that to Vanguard's customer service reps - we were told "no can do" when trying this for our son. 

The Vanguard web site itself seems to have contradictory information.  At https://investor.vanguard.com/etf/fees we find

When you open your Vanguard Brokerage Account, you'll initially need to add at least $3,000 to your settlement fund.

But at https://investor.vanguard.com/stocks/how-to-invest-in-stocks there is

There's no minimum investment for your money market settlement fund.
There's no minimum initial investment for stocks and ETFs—it's the price per share.

Things may have changed in the meantime. Vanguard has recently changed the setup of IRAs to include the brokerage accounts by default. Also the minimums may vary by type of account. A plain Vanguard Brokerage Account is a post-tax non-retirement account, so the rules may be different.  A brokerage account bundled within an IRA could have its own rules.

As for setting up the account, I wasn't able to get it opened online for a minor, but had to get paperwork from Vanguard and mail it back so that a custodian account is opened. My daughter's account shows up on my 'accounts summary' page, but she also has her own logon where she can only see her account (and hopefully watch it grow - that's the idea at least). I think it reverts to her fully when she reaches 18, but I hope she'll have enough money sense by then for that to be safe. (Either way, it's her money.)

Bottom line, as of now, Vanguard definitely has a system set up for minor Roth IRAs, with no minimum.

[MDM]

Appears Fidelity now plays in this field.  See https://www.fidelity.com/retirement-ira/roth-ira-kids.

That makes Fidelity, Schwab, and Vanguard all workable choices for the thread subject.

[Penny Lane]

I think there are more choices now than when I set them up for my teenaged girls over 10 yrs ago; I resorted to the bank, I am still the custodian.  I need to suck up the fee to change them to either Fidelity or Vanguard so thanks for this reminder.  Every year I go over the account with them, kick in another grand each for them, and make sure they contribute something as well.  They finally realize what a boon this is to their futures, now that they are 20 somethings.  My kids were required to work in the summer despite our 2 professional incomes; they thank us for this now.

[Poundwise]

I'd like to pull the trigger on setting up a Roth for my son who made a couple hundred last year mowing lawns and shoveling snow. I had some trouble figuring out how to open a custodial brokerage account at Vanguard online. It's not possible using their standard "Open an account" forms.   For those who have done this, which forms did you fill out and how has it been working for you and your child? 

Thank you!!

[milliemchi]

I'd like to pull the trigger on setting up a Roth for my son who made a couple hundred last year mowing lawns and shoveling snow. I had some trouble figuring out how to open a custodial brokerage account at Vanguard online. It's not possible using their standard "Open an account" forms.   For those who have done this, which forms did you fill out and how has it been working for you and your child? 

Thank you!!

You don't want a brokerage account, you want a Roth IRA for him. Just call Vanguard and they'll walk you through it. There will be a settlement account within the Roth IRA, holding cash, and then you will be able to trade ETFs ($$) (a brockerage option) and in and out of mutual funds ($$$$). Both my kids have Roth IRAs. The little one (6) is especially fascinated at looking how his balance grew as he was earning money.

Since it will be a custodial account, you will need to fill our paper forms. Again, Vanguard will walk you through it.

[tweezers]

I'd like to pull the trigger on setting up a Roth for my son who made a couple hundred last year mowing lawns and shoveling snow. I had some trouble figuring out how to open a custodial brokerage account at Vanguard online. It's not possible using their standard "Open an account" forms.   For those who have done this, which forms did you fill out and how has it been working for you and your child? 

Thank you!!

You don't want a brokerage account, you want a Roth IRA for him. Just call Vanguard and they'll walk you through it. There will be a settlement account within the Roth IRA, holding cash, and then you will be able to trade ETFs ($$) (a brockerage option) and in and out of mutual funds ($$$$). Both my kids have Roth IRAs. The little one (6) is especially fascinated at looking how his balance grew as he was earning money.

Since it will be a custodial account, you will need to fill our paper forms. Again, Vanguard will walk you through it.

Are there any red flags raised with a 6 year old earning income?  Our two are nearly 7 and 9, and I assumed that I would need to wait until they were at the babysitting/lawn mowing phase to open a Roth with them. 

[milliemchi]

I'd like to pull the trigger on setting up a Roth for my son who made a couple hundred last year mowing lawns and shoveling snow. I had some trouble figuring out how to open a custodial brokerage account at Vanguard online. It's not possible using their standard "Open an account" forms.   For those who have done this, which forms did you fill out and how has it been working for you and your child? 

Thank you!!

You don't want a brokerage account, you want a Roth IRA for him. Just call Vanguard and they'll walk you through it. There will be a settlement account within the Roth IRA, holding cash, and then you will be able to trade ETFs ($$) (a brockerage option) and in and out of mutual funds ($$$$). Both my kids have Roth IRAs. The little one (6) is especially fascinated at looking how his balance grew as he was earning money.

Since it will be a custodial account, you will need to fill our paper forms. Again, Vanguard will walk you through it.

Are there any red flags raised with a 6 year old earning income?  Our two are nearly 7 and 9, and I assumed that I would need to wait until they were at the babysitting/lawn mowing phase to open a Roth with them.

There are babies earning income from modeling gigs. Little kids can earn money for pet-sitting, etc. Money you pay them for small tasks is acceptable. Allowance is not. The key is to stick to market rates. For example, what is the market rate for a 6 year-old designing a birthday card so you don't have to spend $3.50+tax at CVS for one? (this is one of the things we do) I log all that I pay them and why, so that if the IRS comes (which they won't), I have documentation. Also, under $400 per year, they don't have to file tax forms. You can google all this.

[Poundwise]

I'd like to pull the trigger on setting up a Roth for my son who made a couple hundred last year mowing lawns and shoveling snow. I had some trouble figuring out how to open a custodial brokerage account at Vanguard online. It's not possible using their standard "Open an account" forms.   For those who have done this, which forms did you fill out and how has it been working for you and your child? 

Thank you!!

You don't want a brokerage account, you want a Roth IRA for him. Just call Vanguard and they'll walk you through it. There will be a settlement account within the Roth IRA, holding cash, and then you will be able to trade ETFs ($$) (a brockerage option) and in and out of mutual funds ($$$$). Both my kids have Roth IRAs. The little one (6) is especially fascinated at looking how his balance grew as he was earning money.

Since it will be a custodial account, you will need to fill our paper forms. Again, Vanguard will walk you through it.

Thanks so much!  So he will be able to sidestep the high minimum for mutual funds this way? He made no more than $200 last year, but I'm hoping that with increasing age (14), some repeat customers, and the enjoyment in watching his accounts increase (hopefully) that he will get up the gumption to earn more this year.

Thanks also for the tips on how younger children can earn money, as well.

[milliemchi]

I'd like to pull the trigger on setting up a Roth for my son who made a couple hundred last year mowing lawns and shoveling snow. I had some trouble figuring out how to open a custodial brokerage account at Vanguard online. It's not possible using their standard "Open an account" forms.   For those who have done this, which forms did you fill out and how has it been working for you and your child? 

Thank you!!

You don't want a brokerage account, you want a Roth IRA for him. Just call Vanguard and they'll walk you through it. There will be a settlement account within the Roth IRA, holding cash, and then you will be able to trade ETFs ($$) (a brockerage option) and in and out of mutual funds ($$$$). Both my kids have Roth IRAs. The little one (6) is especially fascinated at looking how his balance grew as he was earning money.

Since it will be a custodial account, you will need to fill our paper forms. Again, Vanguard will walk you through it.

Thanks so much!  So he will be able to sidestep the high minimum for mutual funds this way? He made no more than $200 last year, but I'm hoping that with increasing age (14), some repeat customers, and the enjoyment in watching his accounts increase (hopefully) that he will get up the gumption to earn more this year.

Thanks also for the tips on how younger children can earn money, as well.

I think I opened my son's account with $0. Now he has ~$50, and it's all in the settlement federal money market account. So, he's earning $0.04 per month. He thinks that's great.  Once he gets to ~$150, I will by an ETF for him, and then it's an investment. The minimum for the mutual fund is not the minimum for the Roth IRA. But you do need $$$$ in the Roth IRA if you want to invest in the mutual funds from within the Roth IRA. Or you can just buy ETFs instead.

[elysianfields]

<snip>
Has anyone found a good no (or very low) startup and ongoing fee place that would take a child's Roth IRA with only ~$100? 

Some of the usual suspects don't work: Vanguard and Schwab have a $1,000 minimum, Fidelity and TD Ameritrade don't do <18 years old, local credit union doesn't do Roth IRAs, etc.
<snip>

I successfully opened a custodial Roth IRA for my minor child at TD Ameritrade last year, with <$200.  We bought one of the no-commission ETFs and TD Ameritrade provides free dividend & capital gains reinvestment, which allows the earnings to compound.  Glad to hear your Schwab solution is working for you.

[letsdoit]

or you could pay (appx 8k?) to have lawyer create a trust and put stuff in trust for him . it wont have the roth tax break but more flex than 529

[marion10]

Over 15 years ago we were able to open an IRA for my daughter at TIAA-CREF and the minimum was $50. She was eligible because she was working at the public library. My son opened his - also at TIAA- CREF when he was 18 and working at his college’s computer lab.

[Not Sure]

The landscape has changed a bit since this thread was started.  Fidelity recently dropped their investment minimums to zero for many funds.

[secondcor521]

The landscape has changed a bit since this thread was started.  Fidelity recently dropped their investment minimums to zero for many funds.

Fund minimums are one issue.  Opening IRAs for minors is another hurdle that some investment companies - for whatever reason - simply won't do.

[MDM]

The landscape has changed a bit since this thread was started.  Fidelity recently dropped their investment minimums to zero for many funds.

Fund minimums are one issue.  Opening IRAs for minors is another hurdle that some investment companies - for whatever reason - simply won't do.

True.  If one uses the magic word "custodial", though, it often (don't know about always) unlocks the door and allows the investment in the minor's name.

[secondcor521]

The landscape has changed a bit since this thread was started.  Fidelity recently dropped their investment minimums to zero for many funds.

Fund minimums are one issue.  Opening IRAs for minors is another hurdle that some investment companies - for whatever reason - simply won't do.

True.  If one uses the magic word "custodial", though, it often (don't know about always) unlocks the door and allows the investment in the minor's name.

Right, of course.  It's been a few years but when I went to open Roth IRAs for my minor children, Vanguard said no (in addition to having $1K minimums), even to a custodial IRA.  So the kids now have Schwab custodial Roth IRAs and things have been going well.  I was thinking originally that they could move their IRAs to Vanguard when they got older to save a tiny bit on fees, but now the fees are so low it's not really worth the hassle.

[MDM]

It's been a few years but when I went to open Roth IRAs for my minor children, Vanguard said no (in addition to having $1K minimums), even to a custodial IRA.  So the kids now have Schwab custodial Roth IRAs and things have been going well.

Our story as well!

Things have changed, but that's the way it was.

[letsdoit]

can you really pay babies for being models?  and pay 5 year olds to clean stuff?
then the paretns create w-2s and file taes for IRS ?
will the IRS think it's fraud?

[Chrissy]

The children are independent contractors, so no W-2s.  They don't have to files taxes as long as they make less than $400/yr.

[kenmoremmm]

The children are independent contractors, so no W-2s.  They don't have to files taxes as long as they make less than $400/yr.

https://www.forbes.com/sites/kellyphillipserb/2019/01/30/do-you-need-to-file-a-tax-return-in-2019/#e866ed461064

For single dependents who are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income (such as from ordinary dividends or taxable interest) was more than $1,050 or if your earned income (such as from wages or salary) was more than $12,000.

based on this, can one contribute $1050 to their dependent's roth account without any strings attached?

[MrThatsDifferent]

can you really pay babies for being models?  and pay 5 year olds to clean stuff?
then the paretns create w-2s and file taes for IRS ?
will the IRS think it's fraud?

It’s what Go Curry Cracker did

[Chrissy]

The children are independent contractors, so no W-2s.  They don't have to files taxes as long as they make less than $400/yr.

https://www.forbes.com/sites/kellyphillipserb/2019/01/30/do-you-need-to-file-a-tax-return-in-2019/#e866ed461064

For single dependents who are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income (such as from ordinary dividends or taxable interest) was more than $1,050 or if your earned income (such as from wages or salary) was more than $12,000.

based on this, can one contribute $1050 to their dependent's roth account without any strings attached?

I don't see how.  You have to have earned income to contribute to an IRA.

[seattlecyclone]

The children are independent contractors, so no W-2s.  They don't have to files taxes as long as they make less than $400/yr.

https://www.forbes.com/sites/kellyphillipserb/2019/01/30/do-you-need-to-file-a-tax-return-in-2019/#e866ed461064

For single dependents who are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income (such as from ordinary dividends or taxable interest) was more than $1,050 or if your earned income (such as from wages or salary) was more than $12,000.

based on this, can one contribute $1050 to their dependent's roth account without any strings attached?

I don't see how.  You have to have earned income to contribute to an IRA.

Right. You are not allowed to contribute more than your earned income to an IRA, whether you have to file a tax return or not. If you are found to have contributed more than the limit to an IRA you can be subject to a 6% penalty for each year since the excess contribution was made.