Ask just about anyone about their financial planning and what they would have done differently, and they’ll answer “I wish I would have started saving sooner”. As parents, we’re in a position of being able to keep our kids from having that same regret.
Saving money teaches kids discipline, perseverance, the impact of small habits, and the power of compounding.
If a child had $6,000 and invested it at age 16 (at 5% growth per year), it would grow to over $50,000 at age 60. If they would add $6,000 per year every year over that same period of time, they would have $958,000 at age 60. Imagine if that were invested in a Roth IRA and the growth was tax-free!
Sounds great, but the first hurdle is that when kids are 16, they often don’t have $6,000.
There are several ways parents can help:
If you own a dental practice (any business), you can employ your children, even before age 16. A job in your dental practice can teach them a work ethic, offer work experience, and provide income that will make kids eligible for making a Roth IRA contribution. This can be a great way for younger kids to earn some money.
Typical jobs when hiring your children in your practice include routine office work, making deliveries or answering phones, and maybe even confirming appointments. Many tech-savvy teens are adept at building or running a website, updating social media, or maintaining spreadsheets.
Whether they work for you or get a more conventional teenager after-school or summer job with a W2, they can contribute up to 100% of their earnings to a Roth IRA, up to the maximum ($7,500 in the 2026 tax year). If they would rather spend that money than save it, the money to fund the IRA can come from forward-looking parents (or grandparents), as long as the contribution limits are recognized.
Can you pay kids for household chores and put the money into a Roth IRA?
Kids can contribute to a Roth as long as they have earned income. That can be as an independent contractor working for you and reporting the income on Schedule C and paying self-employment taxes, or as “household help” where you pay Social Security, Medicare, etc.
There are some age restrictions on what kids can legally do for money (age-appropriate, shouldn’t be potentially hazardous either to the worker or the recipient of the person served), but you weren’t going to risk your kids anyway, were you?
New(ish) provisions to 529s and incoming Trump Accounts
Under Secure Act 2.0 in 2024, unused 529 funds can be rolled over into a Roth IRA in the 529 beneficiary's name. This is a huge game-changer!
A maximum of $35,000 can be rolled over during the beneficiary's lifetime (subject to the Roth IRA contribution limit each year to eventually reach the $35k limit). There are further requirements for the 529 to be open over 15 years, and there is a 5 year look back where any contributions/earnings over the last 5 years are NOT eligible to be rolled over. This is a great option to not have to worry about "overfunding" a 529 and still be able to get the tax benefits out of it.
Learn more about this type of rollover here
For new parents who had or plan on having a child after January 1, 2025, there is expected to be a new type of account available for minors starting July 2026. Titled "Trump Accounts", these investment accounts will automatically open for children when they receive a Social Security number. The big selling point of this account is the $1,000 deposited by the Federal Government when the account is opened. The beneficiary of the account will not be able to access any funds until they turn 18, and limited contributions can be deposited into the account before then.
Updates on the rollout of these accounts can be seen here
The Bottom Line
Helping your kids start saving early is an incredible gift that will keep on giving. Ron Lieber, author of “The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money” says “every conversation about money is also about values.”
This isn’t just about saving; the values that come from learning to save include the importance of having a long-term purpose, the value of setting aside a portion of your earnings, and the rewards of delayed gratification – great lessons at any age.
You can’t turn back the clock for your own savings, but you can start your kids early and give them an incredible head start. Call or email us to talk about how to set this up.