Not tax or financial advice. Rules change and every family is different, so check with a tax professional before you open or fund an account.
Here's the part most parents don't know: a kid who earns money can have their own Roth IRA. And money from a real small business, like their own store, can count.
Why parents care
Time does the heavy lifting. A dollar a 9-year-old puts away has more than 50 years to grow before retirement.
An illustration, not a promise: $500 invested at age 9, growing 7% a year, would be about $22,000 at 65. Markets go up and down, and nobody can guarantee a return. But the head start is real.
And in a Roth, the growth is tax-free when it's taken out in retirement, under the rules in place today.
The one rule: it has to be earned
A kid can contribute up to what they earned that year, capped at the IRA limit. For 2026 the limit is $7,500.
- Counts: pay from a job, and profit from a real business they run.
- Doesn't count: allowance, birthday money, gifts.
The cap is set by what your kid earned. Some families put in money to match their kid's profit. Ask your tax professional how that works for you.
When store money counts
The IRS treats a real small business differently from a hobby. What helps a kid's store look like a business:
- They sell regularly, not once.
- They set prices to make a profit.
- There's a record of every sale and every cost.
Lemonade Stand keeps the sales side for you: every order and price, by date. Add what they spent on supplies and you have the profit.
Only profit counts. If your kid sold $300 of bracelets and spent $60 on beads, $240 is the number that matters.
The $400 line
If your kid's business profit is $400 or more in a year, they need to file a tax return and pay self-employment tax on it (Social Security and Medicare). Under $400, that filing usually isn't required. Their profit can still count as earned income for the IRA.
This is the step most families skip, and it's the one worth asking a professional about.
How to start
- Keep the record. Profit for the year, after costs.
- Open a custodial Roth IRA. Most large brokerages offer one. You manage it until your kid is an adult.
- Contribute up to the profit. You can do it any time until the tax deadline the following April.
- Show them the account. Seeing their own money grow is the lesson.
Why this matters more than the money
A kid who prices a product, makes a sale and then watches that sale grow in an account they own learns the whole loop: earn, keep, grow. No worksheet teaches that.
That's the point of a kid's first business. Money is a courage skill as much as a math skill.
Want this built into Lemonade Stand? We're thinking about it. Tell us yes and we'll let you know first.
Frequently asked questions
Can a child have a Roth IRA?
Yes. There's no minimum age. The child needs earned income, and an adult opens and manages a custodial Roth IRA for them until they're an adult.
Does money from a kid's business count as earned income?
It can. Profit from a real business the child runs can count as self-employment income. Occasional hobby sales are treated differently, so regular selling, profit-minded prices and good records matter.
How much can a kid put in a Roth IRA in 2026?
The lesser of what they earned that year or $7,500, the 2026 IRA limit.
Does my kid have to file taxes on their store?
If their business profit is $400 or more in a year, they generally need to file a tax return and pay self-employment tax. Below that, filing is usually not required. Check with a tax professional.
Can allowance or gift money go in a kid's Roth IRA?
Allowance and gifts aren't earned income, so they don't raise the limit. The limit is set by what the child earned.
Not tax or financial advice. Sources: IRS Publication 590-A, Contributions to IRAs and IRS: Self-employment tax. The 2026 limit is from IRS Notice 2025-67.