Funding your Roth IRA is usually one of the best financial decisions you can make. This puts money where it will never be taxed again during your lifetime, which means it is of great advantage especially to young people who will experience tax-free growth for a much longer amount of time.

Contributions to a Roth IRA are always made with after-tax dollars, so you don’t get a tax deduction for contributing. However, since children rarely earn enough to have to pay taxes, it is nearly always better for them to fund a Roth IRA rather than a traditional IRA.

We are strong advocates of helping teenagers fund their Roth IRAs in order to begin the process of saving for their retirement. Since contributions can later be withdrawn, they should even fund their Roth IRA if they plan on using the money for something else.

In 2016, those under age 50 can only fund their Roth IRA up the limit of your earned income or $5,500, whichever is less. If your child has only earned $300 in babysitting money, it is worth putting those $300 in their Roth IRA. You can help encourage them to learn to work, save, and invest by offering to give them money if they fund their Roth. Many employers encourage the same behavior with their employees by offering an employer match for money invested in a 401(k).

The IRS does not require dependents whose gross income is only earned income to file a tax return if the amount is less than a certain amount. The limit for single dependents who are under age 65 and are not blind is currently $6,300. That means if they make just enough to fund their entire Roth IRA ($5,500), they would not have to file a tax return.

This is only possible if all of their income was “earned” income. If they have any interest or dividend income at all, they would have to file a tax return, but if the taxable interest is less than $1,500, they can probably file with the form 1040EZ which is much simpler than the full 1040. It can even serve as a learning experience for them as all it requires is following simple instructions and some math skills.

That being said, if your child’s earned income came from self-employment (and not a household employer), they will have to pay self-employment tax. If their net earnings were $400 or more, they will have to file Schedule SE to calculate the self-employment tax owed and, unfortunately, they will have to file the 1040 instead of the 1040EZ.

There is one last special rule that may arise while helping your child find earned income to fund their Roth, but it is for the benefit of the parents. When your child works for a business owned solely by one or both parents, then the business does not need to pay the Social Security, Medicare, or Federal Unemployment Tax (FUTA) that would normally be due on the child employee’s wages. This exemption from Social Security and Medicare taxes lasts until the child is 18 and the exemption from FUTA lasts until they turn 21.

Saving for retirement can never start too early and a Roth account is a great vehicle for those savings. Don’t let stress about tax filing requirements keep you or your child from a powerful opportunity to provide for their future.

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