If your child earns income from a job – even if it’s working for you – it’s time to open a Roth IRA.

Better than a regular savings account, all the money invested through a Roth IRA grows tax-free. And since your child almost certainly qualifies for the lowest possible tax rate (if income taxes kick in at all) now, he or she will end up paying less in taxes – keeping more of their own money – overall.

And unlike other types of retirement accounts, the money your child contributes is accessible without any tax penalties. That means he or she can use it to pay for a car, for college, for a down payment on a house…or retire crazy early with a sizable nest egg.

Here are the basic rules:

  • They can’t contribute more than they earn
  • They can contribute any amount up to that year’s maximum ($5,500 for 2018)

Many online brokers will let you open custodial accounts with very little money. For example, Schwab offers custodial IRAs with a $100 minimum and Fidelity has no minimum requirement to open these accounts.

In addition to being a great way to supercharge savings, your child will learn about money management, investing, and smart financial habits…all with a parental safety net.