Nicole Lapin

Now for account three.

the custodial Roth IRA.

This is one that gets people's attention because most of my clients at my firm, Private Wealth Collective, have never heard of it for kids this young.

And when I say my one-year-old daughter has one, I understand exactly why a retirement account for a one-year-old sounds insane.

But here's how it works.

A custodial Roth IRA is a retirement account that a parent opens on behalf of the kid.

You're the custodian.

He or she is the beneficial owner.

You manage it until they reach the age of majority and then it transfers fully to them.

The account follows the same rules as with a standard Roth IRA.

Contributions are made with after-tax dollars, the growth is federally tax-free, and qualified withdrawals in retirement are tax-free.

Unlike custodial brokerage accounts and 529 plans, with custodial Roth IRAs, parents cannot fund this account with their own income.

Your kid has to have

earned income from a W-2, a 1099, from babysitting, from lawn mowing, anything really that's reportable to the IRS.

And there are contribution limits, just like with adult Roth IRAs.

The limit in 2026 is $7,500.

Now, I need to give you the number that changes everything.

Everything.

Because the power of this account is almost embarrassing when you run the math.

A one-time contribution of $7,500 into a Roth IRA, no additional contributions at all, would grow to approximately $600,000 over 65 years at a 7% average annual rate of return.