Why July Is the Perfect Time to Set Up a Roth IRA for Your Teen

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You know what’s cooler than your teen making money this summer?
Them keeping it. Even better—growing it tax-free for the next 50 years.

Let’s talk about the parenting move that’ll make Future You and Future Them both fist-bump:
Opening a Roth IRA for your kid while they’ve got a summer job.

Why Now?

It’s July. Your teen is flipping burgers, lifeguarding, babysitting, or grinding through their internship-for-experience (aka unpaid). If they’re earning real money—and it’s reported as income—they’re eligible to contribute to a Roth IRA.

Why is this a big deal?
Because the earlier they start, the more time the magic of compounding has to do its thing. Time is the real MVP of wealth building, and your teen has a ridiculous amount of it.

What’s a Roth IRA, and Why Should a Teen Care?

In Money Dad terms:
A Roth IRA is like a “No Touchy Until Retirement” Super Account where they put in after-tax dollars and never pay taxes on the growth or the withdrawals (as long as they play by the rules).

Imagine your 16-year-old contributes just $3,000 this summer.
If that grows at a 7% average annual return, that single contribution could turn into over $90,000 by age 65.

Now imagine they keep doing it for a few summers. That’s how you raise a millionaire before they even graduate college. No crypto. No lottery. Just math.

Can They Actually Contribute?

Yes—but only if they have earned income. That means:

• W-2 income (part-time job, summer gig)

• 1099/self-employed work (babysitting, tutoring, lawn mowing)

They can contribute up to the amount they earn, capped at $7,000 for 2025.

Bonus tip: You can even gift them the money to contribute, as long as they actually earned it. So if they made $2,000 lifeguarding, you can slide them the $2,000 and say, “Don’t spend it—invest it.” Financial parenting judo.

How to Set It Up (Without Losing Your Mind)

Most custodial Roth IRAs are quick to set up through companies like:

• Fidelity

• Charles Schwab

• Vanguard

• Betterment

Look for:

• No account minimums

• Low fees

• Easy-to-use mobile apps (Gen Z doesn’t “do” desktop logins)

It’s called a custodial Roth IRA because you’ll technically be in charge until they turn 18 (or 21 in some states). After that, they take full control—hopefully with enough sense to let it keep growing.

Use This as a Teaching Moment

Teens crave independence and real-world relevance. Use this opportunity to teach them:

• The power of compound interest (show them a chart—they’ll freak out)

• What the stock market is (not just something old guys in suits yell about)

• How to invest smartly (target date index funds are a solid place to start)

This is more than just a money move. It’s a mindset shift. You’re teaching them that their money can work just as hard as they do—maybe harder—and for decades.

Final Thought from The Money Dad

This summer, don’t just make them save for gas money and late-night Taco Bell runs.

Help them plant a seed that can grow into real wealth. Not fake, social-media flexing wealth, but the kind that buys freedom, choices, and peace of mind.

Because one day, when your kid retires a millionaire thanks to that Roth IRA you helped them start at 16—they’ll probably still forget to call you back, but deep down?
They’ll know who the real MVP was.

👊 Money moves like this aren’t just smart—they’re legacy-building.
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