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Legitimate Ways to Contribute to a Roth IRA for Your Children

  • Aug 29
  • 8 min read

One of the greatest financial gifts you can give your children is starting a Roth IRA that will grow in a tax advantaged way over decades. If you max out the allowable contribution to a Roth IRA when your kids are young, these accounts can grow to a substantial six figure or even multiple seven figure amount by the time they can access them. If they don’t access them, they can be inherited by your grandchildren. As such, many physicians in our online communities for doctors ask about ways that they can contribute to a Roth IRA, especially if a child is already earning money or considering taking a job for that purpose. Below, we’ll cover what counts as legitimate income, ways doctors can pay their children if they don’t already have income coming in, and more. 


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How a single Roth contribution of $7500 at the age of 10 can turn into over a half a million dollars at retirement for your child

What’s the big deal with funding a Roth IRA for your kid - how much can it really add up to?


How much can you contribute to a Roth IRA?


In 2026, the limits to what you can contribute to a Roth IRA is $7500, assuming that your child earns that amount. If they don’t earn that much, then the limit they can contribute is the amount that they earn.



How does this potentially add up to a million dollars by the time they hit retirement age or access the account?


Children have 5-6 decades of tax free growth prior to them hitting retirement age - and even then, because this is a Roth account, they’re not required to take out the money due to required minimum distributions (RMDs). Therefore, you could be looking at even more decades of tax free growth, to the point where the money could even be inherited by their children.


Let’s say you only contribute to the Roth IRA one (1) time on behalf of your child at 7500 when they’re 10 years old, and never contribute to or touch it again until they’re 65. Assuming an 8% average investment return annually, this will be $516,853.92 in 55 years.


Now imagine if you contributed for 10 years or more, or if you started contributing annually when they were a baby.


You’ve set them up for retirement before they’ve even started their career, and you’ve transferred your wealth to your child in a tax efficient way. Now you likely understand why so many physicians in our communities want to find ways to do this for their children if they have the means to set aside this money today.



Can you even legitimately fund a Roth IRA before a child is old enough to go out and get a job?


The requirement to be able to fund a Roth IRA is that your child has earned income. This doesn’t necessarily mean that they have to be old enough to be able to apply to a job at the local coffee shop, but rather that they have received compensation for something that qualifies as earned income.



What constitutes Roth-eligible income?


The key thing for income to be eligible as money that counts towards the amount you can put into a Roth IRA is that it’s compensation for a real task that was done - in other words, it’s earned, not given. 


The IRS delineates IRA eligible compensation as including wages, salaries, tips, commissions, bonuses, professional fees, and self-employment income. It specifically excludes earnings from property or investments, including rental income, interest and dividends from being eligible sources of money that can be counted as income towards IRA contributions.


In the context of children, this typically means:


  • W2 wages that are earned from being on payroll

  • 1099 income from freelance work that is documented and where a 1099 is issued

  • Babysitting

  • Lawnmowing

  • Tutoring services

  • Money generated through a business they start

  • Commissions or tips they receive from work they do


This does NOT mean:


  • Gifts from you or others

  • Allowance money

  • General household chores (more on this below)

  • Interest from a bank account

  • Dividends from shares they hold or investment accounts under their name

  • Capital gains

  • Rental income from properties they’re owners on

  • Inheritance



What are some ways for your children to earn income that is eligible for Roth contributions?


Strategies for children to earn Roth eligible income

Strategy 1: Tell your older children to get a job or find them a job


This is the most straightforward way, because it doesn’t require you having a way to pay them. If they’re old enough, there are so many options. The benefits of getting a job extend far beyond the money - it could teach them responsibility, what it takes to earn a dollar and the value of money, and teamwork, for example.


Common employers for older children include:


  • Conventional job working at the mall or for another business

  • A paid internship

  • Tutoring for a company

  • Being a camp counselor

  • Being a lifeguard

  • Selling products they’ve made


Younger children may also be able to earn money through child modeling or acting gigs, for example.



Strategy 2: Have your kids develop a side gig that generates income


Creating their own thing has several additional benefits in addition to conventional jobs. For example, this can foster creativity, teach entrepreneurship, and give them something to talk about their college applications. 


Examples: 


  • Babysitting

  • Pet sitting or dog walking

  • Lawn care

  • Tutoring

  • Coaching younger children

  • Giving lessons for something they’re talented in

  • Selling products they’ve made

  • Monetizing a popular social media account

  • Creating a scalable business



Strategy 3: Employ your children through your private practice


If you owner or are a part owner in a private practice, there may be opportunities for your child to help with odds and ends, depending on their skill sets and capabilities. 


Examples of tasks that you could employ a child for at a private practice include:


  • Participating in marketing events throughout the community

  • Helping with filing/scanning/indexing old medical records

  • Helping stock the supplies or taking stock of inventory

  • Shredding records that need to be shredded

  • Helping prepare patient education materials or packets

  • Cleaning/organizing around the practice

  • Data entry tasks

  • Preparing mailings or stuffing envelopes

  • Helping with the practice’s social media, whether participating in the creation or editing

  • Creating or editing marketing materials

  • Helping with your practices website

  • Scribe type work

  • Market research

  • Any other legitimate administrative or marketing work appropriate for the child's age


Know that the rules for employing the child may be different if it’s your own practice and you’re the solo owner versus if your practice is a larger size or has co-owners. Always check with local hiring rules for minors. There may also be different tax implications depending on how your practice is structured, so it’s important to make sure you put them on payroll if needed, and pay appropriate employment and/or payroll taxes as necessary.



Strategy 4: Employ your kids through your side business or other company you own


If you yourself have a company or side gig outside of your physician job, there are lots of ways to employ your children depending on the nature of your business. Some examples include:


  • Modeling or being a part of social media

  • Editing social media assets such as images or videos

  • Helping to post social media

  • Creating PowerPoint presentations

  • Doing market research

  • Using AI to create assets for your business 

  • Doing illustrations

  • Writing content for your blog

  • Helping with the website

  • Cleaning the office

  • Helping package goods to mail

  • Administrative work like maintaining spreadsheets, taking stock of inventory, data entry


The possibilities are endless. Always check with your accountant about what would be appropriate, the right ways to pay them, and how to properly document their involvement.



FAQ: Can I pay my children for doing chores so that I can fund their Roth IRA?


This is a much more complicated question. Household chores don’t typically create Roth-eligible compensation. The IRS does recognize that children could be household employees in certain appropriate circumstances, but it’s much more nuanced. It’s much safer to be tied to an actual business where there’s more documentation to withstand an audit, such as documented babysitting or lawncare services with receipts. We strongly recommend talking to an accountant about what would pass the sniff test with the IRS before assuming you can just create justification if needed.  




I want my child to enjoy the money that they earned so they can earn the value of hard work. Does contributing to the Roth IRA mean they can’t spend the money they earn?


No. This is an important distinction. You can contribute to their Roth IRA on their behalf, and allow them to spend their money however you feel appropriate. The IRS says that parents can provide the actual cash that goes into the Roth. The critical component is not who funds the Roth, but rather that the child has sufficient qualifying compensation, and that the IRA contributions cannot exceed the individual's compensation for the year.



What do I need to know about taxes?


This part is beyond the scope of this article, but suffice it to say, when your child has earned income, particularly if you’re paying them, you need to think about taxes. If you’re paying them from your entity, how your entity is structured will influence how they’re taxed. Don’t assume they don’t pay taxes because they are below the threshold for taxable income - they may still need to be on payroll and pay payroll taxes, as well as file a tax return, if you’re paying them through your private practice or side business. Talk to your accountant! The last thing you want is to create an accounting nightmare or penalties.




Conclusion


The ability to have a Roth funded in early years can be of immense value, and is one example of where children in higher income families who can afford to set aside money into these accounts come out way ahead financially. Physicians who want to pass on wealth to their children in a tax efficient way should definitely consider it, especially if they have a side gig or private practice that allows them to pay their children at an age younger than they might be able to have a normal job. Also remember that the benefits of earned income, jobs, and side gigs in early years go far beyond financial benefits - they’re great ways to teach your kids the value of money, teach them about finances and entrepreneurship, help develop out interests or hobbies, and give them something great to talk about on their college essays. We hope the ideas above give you a place to start!



Related resources for physicians and finances for their children


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