Opening a Custodial Roth IRA
Open it, fund it, and put it on autopilot
We saw how powerful a Roth IRA can be for teens and college students with part-time jobs. Now let’s cover how to get started.
A custodial Roth IRA is simply a Roth IRA owned by a minor, with a parent or guardian managing it until the age of majority, which varies by state.
Choose a Brokerage
Several reputable financial companies offer custodial Roth IRAs. While many readers are familiar with Vanguard, it currently only offers custodial Traditional IRAs.
Both Fidelity and Charles Schwab offer custodial Roth IRAs with excellent investment options. You can’t go wrong with either.
What You’ll Need
Critcal: The teen must have earned income to qualify for a Roth IRA.
Account holder (teen)
Social Security number
Government-issued ID (passport or driver’s permit/license)
Employment details
Occupation
Employer name and address
Annual income (estimate is fine)
Custodian (parent or guardian)
Social Security number
Government-issued ID
Occupation and employer name/address
Bank account to link
Bank name
Routing and account numbers
Can be in the teen’s or custodian’s name
Open the Account
Go to the brokerage’s website, click Open an Account, choose Custodial Roth IRA, and complete the application. Phone support is available if you have questions.
If you’re using Fidelity, here’s a direct link to their custodial Roth IRA page:
Fund the Account
Once the account is open, link a bank account and make an initial contribution.
Contributions are limited by the teen’s earned income for the year (up to the annual Roth IRA limit), and there are no minimums at Fidelity or Schwab.
Choose an Investment
Unlike a checking or savings account, funding an investment account isn’t enough — you must choose an investment.
A low-cost U.S. stock market index fund is a common recommendation. In particular, total market index funds aim to own nearly every publicly traded U.S. company.
At Fidelity, a great choice is FZROX (Fidelity ZERO Total Market Index Fund), which has a 0.00% expense ratio.
An expense ratio is the annual fee charged by the fund, expressed as a percentage of your investment. Low-cost index funds typically have expense ratios well under 0.1%.
Make sure “reinvest dividends” is selected so dividends are used to buy additional shares in the fund.
One important note: avoid buying mutual funds from other brokerage companies inside your account. These often come with transaction fees that can be a large percentage of small or recurring investments.
Set Up Automatic Contributions
Once the account is funded and invested, you can put it on autopilot with recurring contributions. Fidelity and Charles Schwab support scheduled transfers and specific fund purchases.
Most people save and invest more when it doesn’t require repeated action.
Opening a custodial Roth IRA isn’t complicated — and getting started matters far more than fine-tuning the details.