Why I Like Custodial Roth IRAs for Kids

This is a paid post on behalf of Responsival. All opinions expressed are my own.

Until a couple years ago, I had never thought twice about creating investment accounts for kids because we were concerned about our OWN retirement plans.

Plus, it seems we were so busy with the kids all the time that there was barely any time to plan dinner, much less THEIR investment accounts! HA

Now that my oldest is 17 and my youngest is 13.5, they no longer need as much “hands on” help as they did when they were younger, and I have a minute to think. 🙂

I’ve decided to start looking into ways we can help them in their future and not just their day-to-day immediate needs. 

Plain Language Guidance on Custodial Roth IRAs

I decided to begin with a decision to open an investment or retirement account for my children. 

While I am a CPA myself, I still like getting plain language advice on financial planning from other experts, and I found this blog post about Custodial Roth IRAs vs UGMA Accounts to be super helpful. 

In this blog post, the author clearly explains the differences between custodial Roth IRAs and UGMA investment accounts for kids.

I appreciated this explanation because I had never really looked that much into non-retirement investment accounts for my kids while they’re minors.

Why I Plan on Starting Custodial Roth IRAs for My Kids

Now that I know the complete difference, I can stay that I am still on train ROTH.

Roth IRAs (for anyone, not just kids) allow you to contribute AFTER-TAX money to an investment account that grows tax-free until retirement. The age you have to be to start withdrawing these funds in 59 ½.

I like Roths because they’re tax-advantaged ways to accumulate retirement funds that you can’t touch until 59 ½ without incurring a penalty. Because of these two attributes, you are less likely to just use that cash for whatever you want along the way.

While not technically forced to leave the money in the account, it’s as close to forced as you can get because the benefits of waiting until 59 ½ are great!

I will be sure to clearly impress this fact upon my kids when they become of age to take over their own accounts. 

What to Do First If You Want to Start Custodial Roth IRAs for Your Kids

Custodial Roth IRAs for kids differ from regular Roth IRAs, so make sure to read the article above and seek a professional’s help when setting one up.

Here are a few additional resources I like to help you get started:

• When Should I Open a Custodial Roth IRA for My Kids? ~ The Money Guy Show on YouTube
• Why Your Kids Need a Custodial Roth IRA ~ NerdWallet
• Information Page About All Kinds of Roth IRAs ~ Internal Revenue Service

I hope this helps you as you navigate your finances and think about your childrens’ futures!