Last month, we highlighted Trump Accounts as a new way for parents and grandparents to begin investing for children at an early age. But once your children begin earning their own income, additional planning opportunities become available.
Two strategies in particular can allow parents to use relatively modest gifts today to help their children build significantly more retirement savings over time.
A Roth IRA With Their First Job
A child with earned income can contribute to a Roth IRA, even if they’re still in high school. In 2026, the IRA contribution limit is $7,500, although contributions cannot exceed the child’s eligible compensation for the year.
Importantly, the money contributed to the Roth doesn’t have to come directly out of the child’s pocket.
In one recent example, a client’s high schooler spent the summer working at Chick-fil-A. Rather than asking the child to put away the money they had just earned, the parents contributed a few thousand dollars to a Roth IRA I helped establish for the child.
The child gets to enjoy the income earned from their summer job, while the parents provide a jump start on retirement savings. Because the parents’ gift was well below the 2026 annual gift-tax exclusion of $19,000 per recipient, it generally does not create a federal gift-tax reporting requirement.
The opportunity becomes particularly powerful because of how much time these dollars have to compound.
For example, assuming a hypothetical 9% annual return, $10,000 accumulated in a Roth IRA by age 22 could grow to roughly $112,000 by age 50 without another dollar being added. $20,000 could grow to approximately $224,000.
And there may be another reason to fund a Roth early. As your child advances in their career, their income could eventually exceed the limits for making direct Roth IRA contributions. Building a meaningful Roth balance while they’re young and eligible can give them a valuable pool of tax-free retirement assets decades before retirement.
Help an Adult Child Fund Their 401(k)
The opportunity doesn’t end when children leave home.
Many people in their 20s and 30s aren’t maximizing their workplace retirement plans—not because they don’t understand the benefit, but because their current budget doesn’t allow it. Rent, student loans, childcare and other expenses can make contributing thousands of additional dollars to a 401(k) difficult.
Parents who are already considering making gifts to adult children can potentially approach those gifts differently.
Consider an adult child earning $60,000 per year who is paid twice monthly. At a 5% contribution rate, approximately $125 from each paycheck goes into the 401(k), or $3,000 per year—well below the 2026 employee contribution limit of $24,500.
Suppose the child temporarily increases the contribution rate from 5% to 25%. Their 401(k) contribution increases from approximately $125 to $625 per paycheck.
The parents could then gift the child $500 per pay period to replace the reduction in take-home pay.
A $2,000 gift could therefore subsidize four pay periods of increased contributions, allowing an additional $2,000 to move into the child’s 401(k) without requiring them to absorb the reduction in cash flow.
Instead of simply giving an adult child $2,000 to spend, you’ve effectively helped them redirect $2,000 of their own compensation toward retirement.
A Different Way to Think About Gifting
Helping children financially doesn’t always have to mean paying a bill or giving them cash. Sometimes the greatest long-term impact can come from helping them save money they aren’t yet in a position to save themselves.
Whether that’s opening a custodial Roth IRA for a teenager with their first summer job or helping an adult child temporarily increase their 401(k) contributions, a relatively modest gift today can potentially create decades of additional tax-advantaged growth.
If you’d like to explore either strategy, let me know. I’m happy to help establish a custodial Roth IRA or work directly with your adult child to coordinate increased 401(k) contributions and the gifting strategy needed to support them.
Note: This article was prepared with the assistance of AI-based drafting and research tools. The ideas, analysis, and conclusions reflect the views of Blue Haven Capital and were reviewed prior to publication.
