Market Overview

Fidelity's® Roth IRA for Kids Sees Strong Growth as Parents Prioritize Giving the Next Generation a Head Start on Retirement


Summer Job Season Offers Important Teaching Moment for Parents
Raising Money-Savvy Kids

Fidelity Investments® today announced growth in new accounts
and total assets for its Fidelity®
Roth IRA for Kids
remain strong since the product was introduced in
January 2016. From January 2016 through January 2018, new accounts have
seen a 475 percent increase, with a compounded annual growth rate of 333
percent. Assets have increased 2,399 percent, with a compounded annual
growth rate of 400 percent during the same period. Looking at 2018
alone, the product has realized a 39 percent increase in accounts and a
51 percent increase in assets from January through the end of June.

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Starting early can make a big difference. (Graphic: Business Wire)

Starting early can make a big difference. (Graphic: Business Wire)

Average account size also increased to $3,801 at the end of June 2018
from $2,626 in 2016.1 The growth is driven in large part by
their popularity among parents with children under the age of 18 and
relatives who want to give their kids a jumpstart on saving for the

"Parents know that time is on their child's side and want to encourage
good savings habits as soon as they're able to start earning their own
money," said Melissa Ridolfi, vice president of Retirement and College
Leadership at Fidelity Investments. "Let's be honest, convincing a child
to hand over their hard-earned cash to invest in a Roth IRA may be
challenging, but engaging in financial conversations when your child is
beginning to understand the value of money can help them develop the
discipline to make wise financial decisions later."

A Roth IRA for Kids is a custodial account which can be opened and
managed by any adult- a parent, grandparent, aunt, uncle or even a
family friend- on behalf of a minor earning income. Qualifying income
can come from a job or self-employment such as babysitting, mowing
lawns, or shoveling snow. The earnings and withdrawals are free of
federal taxes.2

Tips for Convincing Kids to Part with Their Summer Job Money
job season offers a timely opportunity for parents to start a discussion
with kids about dedicating some of their earnings to a retirement
account, though the idea may seem de-motivating to a teen who is excited
to have their first taste of financial freedom. Here are three tips to
make the ‘money talk' go a little easier for kids:

  • Start Small: Focus the conversation on how small their
    contribution can be relative to their total take home pay. Start by
    asking them to consider saving 10-15 percent: If they earn $100, that
    would be saving $10- $15. Later, emphasize the growth potential of
    that small savings to help them understand how small contributions can
  • Offer a "Match:" To make the idea of saving even more
    appealing, parents may want to consider offering to "match" their
    child's contributions, to give them a head start in understanding how
    an employer 401(k) plan works.
  • Demonstrate How Saving a Little Can Go a Long Way: One of the
    biggest financial regrets Fidelity hears from those who procrastinated
    on saving for retirement is, "I wish I'd started saving earlier."
    Talking to kids about saving some of the money they've earned is an
    opportunity for parents to demonstrate how time is on one's side when
    it comes to investing, and perhaps offer personal examples
    illustrating why they wish they had started saving when they started
    their first job.

With a long time horizon, even modest contributions to a Roth IRA can
become a sizeable nest egg over time, thanks to the power of tax-free
compound growth. The chart below illustrates how annual Roth IRA
contribution amounts may potentially grow into impressive sums over a
span of decades.

How Does a Roth IRA for Kids Work?
A Roth IRA for Kids
provides all the benefits of a regular Roth IRA. Minors cannot generally
open brokerage accounts in their own name until they are 18, so a Roth
IRA for Kids requires an adult to serve as custodian.

The custodian maintains control of the child's Roth IRA, including
decisions about contributions, investments, and distributions. In
addition, statements are sent to the custodian. However, the minor
remains the beneficial account owner and the funds in the account must
be used for the benefit of the minor. When the minor reaches a certain
required age, typically either 18 or 21 in most states, the assets must
be transferred to a new account in their name. Once the minor reaches
age 21, he or she can request a transfer of the assets to their own
independently owned account.

Other account features include:

  • Tax-free earnings and withdrawals: Both are free of federal
  • Eligible income: Minors must have employment compensation, but
    even if your kid did not land a job with an employer, the income can
    come from self-employment.3
  • Maximum contributions: IRA contributions cannot exceed a
    minor's earnings. For example, if a minor earns $1,000, then only
    $1,000 can be contributed to the account. There's an annual maximum
    contribution of $5,500 per child.
  • No minimum investment: There is no minimum investment to open
    the account, however, certain investments like mutual funds require a
    minimum initial investment.
  • Range of investment options: Roth IRAs for Kids have access to
    variety of investments offering growth or income, such as mutual
    funds, stocks, bonds, ETFs and CDs.
  • Online courses: Fidelity's Learning
    offers online courses to make it easier for kids to learn
    the basics of investing.

For additional information on Retirement and IRAs, please visit
or our Roth
IRA for Kids
landing zone.

Fidelity offers relevant Viewpoint articles about kids and money, such
as Turbocharge
your child's retirement with a Roth IRA for Kids
and Taxes
for Kids

About Fidelity Investments
Fidelity's mission is to inspire
better futures and deliver better outcomes for the customers and
businesses we serve. With assets under administration of $7.0 trillion,
including managed assets of $2.5 trillion as of June 30, 2018, we focus
on meeting the unique needs of a diverse set of customers: helping more
than 27 million people invest their own life savings, 23,000 businesses
manage employee benefit programs, as well as providing more than 12,500
financial advisory firms with investment and technology solutions to
invest their own clients' money. Privately held for 70 years, Fidelity
employs more than 40,000 associates who are focused on the long-term
success of our customers. For more information about Fidelity
Investments, visit

Keep in mind that investing involves risk.

The value of your investment will fluctuate over time and may gain or
lose money.

Fidelity Investments and Fidelity are registered service marks of FMR

Fidelity Brokerage Services LLC, Member NYSE, SIPC
900 Salem
Street, Smithfield, RI 02917

Fidelity Investments Institutional Services Company, Inc.
500 Salem
Street, Smithfield, RI 02917

National Financial Services LLC, Member NYSE, SIPC
200 Seaport
Boulevard, Boston, MA 02110

© 2018 FMR LLC. All rights reserved.

1 Data from January 1, 2016 through June 30, 2018.
A distribution from a Roth IRA is tax-free and penalty-free provided
that the five-year aging requirement has been satisfied and one of the
following conditions is met: age 59 ½, death, disability, qualified
first time home purchase.
3 Generally, compensation is
what you earn from working. For a summary of what compensation does and
does not include, see IRS
Publication 590A Table 1-1

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