Custodial accounts, teen Roth IRAs,
and teaching kids about money.

Custodial accounts (UTMA/UGMA)

Investment accounts you open for a minor. You control until they reach majority (18 or 21 depending on state) verify×DON'T TRUST, VERIFYClaim: UTMA/UGMA transfer age is 18 or 21 depending on state.Verify at: SEC custodial accounts ↗Varies by state. Some allow custodian to extend to 25.. After that, the account is theirs with no restrictions.

Tax: "kiddie tax." Child's unearned income above about $2,500 is taxed at the parent's marginal rate. Not as tax-efficient as a Roth IRA.

• Best for: teaching kids about investing, gifting money with flexibility.
• Not best for college savings: UTMA assets count heavily against financial aid. Use a 529 for that.
• Not best for retirement savings: use a Roth IRA if the child has earned income.

Roth IRA for working teens

If your child has earned income (W-2 job, 1099 work, modeling, acting, babysitting documented properly), they can contribute to a Roth IRA. Contribution limit: lesser of $7,500 or earned income (2026) verify×DON'T TRUST, VERIFYClaim: 2026 Roth IRA limit is $7,500, lesser of earned income.Verify at: IRS IRA limits ↗Annual adjustment..

The gift approach: you can give the contribution to your child even if they spend their actual paycheck. As long as they have earned income equal to the contribution amount, the contribution is valid. You get to fund your kid's Roth without requiring them to save their summer-job money.

Where to open it: Fidelity Youth Account for under-18, or a custodial Roth IRA at Fidelity or Schwab. Bitcoin in a custodial Roth via IBIT or FBTC: extreme long-term exposure (50+ year horizon) in a tax-free wrapper.

529 vs custodial for college

529 is generally better for college savings. Tax-free growth for qualified education expenses. Minimal financial aid impact compared to UTMA. Can now be rolled into a Roth IRA (up to $35,000 under SECURE 2.0) if not used for education. See 529 Deep Dive.

Teaching kids about money

Three concepts that matter more than anything else:

1. Compound interest. Show it visually with real numbers. The compound interest visualizer is built for this. Watching $100/month grow into a six-figure number over decades is a transformative visual for a teenager.
2. Assets vs liabilities. Things that pay you (stocks, bonds, rental property, Bitcoin appreciation) vs things that cost you (car payments, credit card debt). Most adults don't understand this distinction.
3. Why cash loses value. The purchasing powerpurchasing powerWhat a dollar can actually buy, not what the dollar number says. A 1971 dollar bought a gallon of gas. Today's dollar buys roughly a third of one. Same dollar, much less buying ability.Full definition math. See Purchasing Power. Kids who understand this make different career, saving, and investing decisions.

Age-appropriate approaches:

• Under 10: physical money, spend/save/give jars.
• 10-14: bank account, small investing introduction.
• 14-18 with a job: Roth IRA, how taxes actually work, the order of operationsorder of operationsThe recommended sequence for using each spare dollar: build a small emergency fund, capture any free retirement-account match your job offers, kill high-interest debt, fill out a real emergency fund, max tax-advantaged accounts, then invest the rest.Full definition.

Bitcoin for kids: the framing that works is simple. "There will only ever be 21 million Bitcoin. There are 8 billion people. What do you think happens to the price over your lifetime?" Let them reason through it. Don't lecture.

The financial reality of having children

This section exists not to discourage anyone from having children. It exists because most people do not price the decision before making it, which leads to financial stress that could have been planned for.

The USDA's long-running estimate puts the cost of raising one child from birth to age 17 at approximately $300,000 for middle-income families verify×DON'T TRUST, VERIFYClaim: USDA estimated the cost of raising a child born in 2015 to age 17 at approximately $233k (middle-income, 2015 dollars), roughly $300k in today's dollars.Verify at: USDA Expenditures on Children by Families ↗USDA has paused updates to this series; figures are inflation-adjusted from 2015 baseline.. This excludes college costs.

What this does not capture

• Opportunity costopportunity costWhat you silently give up when you pick one option over another. Spending $100 today on dinner means giving up whatever that $100 could have grown into if you had invested it instead.Full definition of reduced career advancement during early childcare years
• One-to-two income transition period if one parent reduces work
• Geographic constraints (proximity to family, school districts) that affect housing costs
• Emotional and relationship investment that can affect career focus

What this means for financial planning

• Having children accelerates the need for a deeper emergency fund
• It accelerates the need for life insurance and disability insurance
• It typically reduces the savings ratesavings rateThe percentage of your income that you save and invest. The single most powerful lever in building wealth.Full definition in early years
• It adds a FIREFinancial Independence, Retire Early (FIRE)A strategy of aggressively saving and investing to reach financial independence decades before traditional retirement age.Full definition constraint: healthcare before Medicare and education costs need separate planning

How to factor it into a FIRE calculation: add estimated annual child costs to your baseline expenses, recalculate your FIRE number, the delta is the financial cost of that specific lifestyle choice. Use the Cost of Living Calculator to model household scenarios with children.

This is not a reason not to have children. It is a reason to plan for them with the same rigor you plan everything else.

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