How to Open a Bank Account for a Kid Entrepreneur (Custodial vs Joint vs Roth)

A kid earning real money from a real side hustle — babysitting, mowing lawns, dog walking, pet sitting, Etsy sales, a snowplow route, whatever it is — quickly outgrows the piggy bank on top of the dresser. A jar of crumpled fives is charming when the kid is seven. When they’re twelve and bringing in $300 a month, it becomes a problem: cash gets lost, cash gets spent on the wrong thing without anyone noticing, and worst of all, cash leaves no paper trail. The minute that kid wants to put money into something more interesting — a Roth IRA, a custodial brokerage, even a meaningful chunk into a college fund — the lack of documentation makes everything harder than it needs to be.

The instinct for a lot of parents is to just deposit the kid’s earnings into the parent’s own checking account and “keep track of it.” Don’t do this. Once the money is mixed in with the parent’s money, it stops being legally distinguishable as the kid’s, and that creates real problems later — tax problems, estate problems, custody-disagreement problems, and Roth-IRA contribution problems if the kid eventually wants to fund retirement off this income. Whose money it is matters, and the cleanest way to establish that is to put the kid’s money in an account that has the kid’s name on it.

There are four real options that fit different stages and different goals. None of them is “the right one” universally — they stack, and the right combination for a 14-year-old earning $300/mo is different from the right setup for an 8-year-old getting $5/wk allowance. Here’s how each one works.

Option 1: Custodial account (UTMA / UGMA)

A custodial account is a brokerage or bank account opened in the kid’s name with a parent (or another adult) listed as the custodian. The legal framework comes from the Uniform Transfers to Minors Act (UTMA) in most states, or the older Uniform Gifts to Minors Act (UGMA) in a handful. They function nearly identically for the purposes of a kid earner — UTMA is more flexible about what kinds of assets it can hold (real estate, intellectual property, more exotic stuff) while UGMA is limited to cash and securities, but for a kid putting babysitting money into index funds, either works.

The most important thing to understand about a custodial account is that the money in it is legally the kid’s, not the parent’s. The custodian (usually the parent) has the legal authority to manage the account while the kid is a minor — make deposits, place trades, withdraw funds for the kid’s benefit — but the money itself belongs to the kid. The custodian cannot take the money back. This is by design and it’s also the biggest tradeoff of the account type.

In general, every major brokerage offers custodial accounts free of charge: Schwab, Fidelity, and Vanguard are the three most common, and many of the big banks (Chase, Bank of America, Wells Fargo) offer them as well, though usually with worse investment options. A custodial account can hold cash, individual stocks, bonds, ETFs, mutual funds, basically anything a normal taxable brokerage account can hold. There are no contribution limits.

Pros: the money is legally and unambiguously the kid’s, which means it survives a parent’s divorce, death, bankruptcy, or change of mind. The kid can watch investments grow over years, which is enormously educational. No contribution caps.

Cons: at the age of majority — 18 in most states, 21 in some, 25 in a few specifically for UTMA — the custodian’s role ends, and the kid gets full unrestricted control of every dollar in the account. This is irrevocable. If the kid uses it to buy a sports car at 18 instead of pay for college, that’s legally their right. Also, UTMA assets count heavily against the kid in financial-aid calculations (FAFSA weighs student assets at ~20% vs ~5.6% for parental assets), which can reduce need-based aid.

Use case: long-term savings the kid is unlikely to need before the age of majority — money you genuinely intend to be theirs.

Option 2: Joint checking account at a real bank

The second option is the most boring and probably the most underused: just open a regular joint checking account at an actual bank with the kid as a co-owner. In general, the major banks — Capital One, Chase, Bank of America, Ally, USAA, Schwab Bank — let a parent open a joint checking account with a kid as young as 13, and a few (notably Capital One MONEY Teen Checking) start at 12 or even younger. The account comes with a real debit card in the kid’s name, online banking access, mobile app, ATM withdrawals, the whole package.

Pros: it’s free. It’s FDIC-insured. It looks and behaves like a normal adult bank account because that’s what it is — the kid is a co-owner. The debit card works everywhere a debit card works, including online checkouts that occasionally trip up the kid-debit-card subscriptions in Option 3. The parent has full visibility into transactions, can set up alerts, and can move money in or out instantly. When the kid turns 18, the account doesn’t need to be migrated or closed — it just becomes a normal adult account, and they can remove the parent as co-owner if they want to.

Cons: parental controls are weaker than the dedicated kid-debit-card apps. There’s no chore-completion-unlocks-spending workflow, no automatic save-to-invest sweep, no parent-approves-each-purchase mode. The bank treats the kid as an adult co-owner of the account, which means customer service will talk to the kid directly without escalating to the parent, and the kid can technically authorize a wire transfer or close the account. (In practice this rarely matters, but it’s worth knowing.)

Use case: day-to-day side-hustle income and spending for a kid roughly 13-18 — old enough that the gamified controls of a kid-debit-card subscription feel babyish, young enough that they still benefit from a parent having co-signer visibility.

Option 3: Kid-debit-card subscription (Greenlight, GoHenry, Step, Famzoo)

This is the category covered in depth in the first-debit-card guide, so we’ll keep the recap brief. Greenlight, GoHenry, Step, Famzoo, and a future TaskTroll card are all subscription services (typically $5-10/month per family) that issue a debit card linked to a fintech-app dashboard rather than a traditional bank account. Strong parental controls — block specific merchants, set spending limits per category, approve transactions in real time, auto-sweep money between spending and saving buckets, tie chore completion to allowance payouts.

They’re designed for younger kids (roughly 8-13) where the goal is gamified financial-literacy learning more than functional banking. The dashboard is the product; the card itself is almost a side effect. They generally don’t graduate into adult accounts at 18 — the kid has to migrate to a regular bank when they age out, which is some friction. Subscription cost adds up over years.

For a kid pulling in $300/mo from a real side hustle, the kid-debit-card model usually isn’t the best fit anymore — the parental-control layer that justified the subscription is more friction than help. They’ve earned the boring joint-checking-account treatment.

Use case: ages 8-13, low transaction volume, primary goal is teaching how money works rather than processing real income.

Option 4: Custodial Roth IRA (the underrated one)

This is the move most parents have never heard of, and it’s the single highest-leverage account type for a kid who is genuinely earning money.

If a kid has earned income — money they received in exchange for work, not allowance, not birthday cash, not money grandma slipped them at Christmas — they are eligible to contribute to a Roth IRA up to the lesser of (a) their earned income for the year, or (b) the annual federal Roth contribution limit. In general, the current Roth contribution limit is around $7,000 (2025) for people under 50; check the current IRS figure since it adjusts most years for inflation. So a kid who earned $2,000 babysitting can contribute up to $2,000 to a Roth IRA. A kid who earned $10,000 mowing lawns is capped at the federal limit (~$7,000 in 2025), with the remainder ineligible.

The magic of a Roth IRA is that contributions go in with money that’s already been taxed (which for a kid earning under the standard deduction usually means it was effectively never taxed at all), grow tax-free for decades, and come out tax-free in retirement. Time in the market is the variable that matters, and a kid starting at age 12 has roughly 50 years of compounding ahead of them before traditional retirement age. To put numbers on it: $1,000 contributed at age 12, untouched, growing at a hypothetical 7% annual rate, becomes roughly $32,000 by age 62. A few summers of consistent contributions in adolescence can fund a meaningful chunk of retirement entirely on their own.

In general, the brokerages that offer custodial Roth IRAs for minors are Fidelity, Schwab, and Vanguard. Fidelity is most commonly recommended for parents because it has no minimum balance, no account fees, and a straightforward online application. The parent is the custodian (manages the account until age of majority); the money is the kid’s; the IRS doesn’t care who funds the contribution as long as the kid had at least that much in documented earned income.

Critical caveat: the earned income must be documented. For self-employment income — babysitting, mowing lawns, dog walking — the kid (or the parent on their behalf) needs to keep a clear paper trail: a receipt book, a simple ledger, dated entries in an app, screenshots of Venmo/Zelle payments labeled with what the work was. Without documentation, a Roth contribution claim is hard to substantiate if the IRS ever asks. This is generic information, not tax advice — consult a CPA for specifics about your situation, particularly around when (and whether) a kid needs to file a return on self-employment income.

The combination that usually works

Most parents don’t pick one of the four — they stack two or three. A reasonable setup for a 14-year-old earning around $300/month babysitting consistently:

Joint checking account as the day-to-day operating account. Roughly $100 in each month, $80 spent on the things teenagers spend money on (movies, boba, video games, friends’ birthdays), $20 surplus that gets swept out to savings.
Custodial Roth IRA funded with 25-50% of monthly earnings — roughly $75-150/mo, or $900-1,800/year. Well under the contribution cap, well within documented earned income, compounding for fifty years. This is the long-game move.
UTMA optional, only if there’s surplus that exceeds the Roth contribution cap — typically not the case at this earning level, but useful for kids with breakout earnings (a teen running a real Etsy shop, an athlete with sponsorship income, etc.).
No kid-debit-card subscription at this age — the controls aren’t worth the subscription fee anymore, and the joint checking account does everything the kid actually needs.

For a younger kid in the 8-12 range earning small allowance plus occasional gig money, swap the joint checking for a kid-debit-card subscription and skip the Roth until they have documentable earned income that isn’t allowance. For an older teen approaching 18 with consistent earnings, lean harder into the Roth and keep the joint checking — they’ll inherit the latter as a normal adult account on their birthday.

💡 In the TaskTroll app: Tag earned income separately from allowance — so the audit trail for an eventual custodial Roth contribution is clean. See tasktroll.com/entrepreneur.