“If you want to help the poor and our next generation, make investment, reinvestment, and businesses welcome.”
I was taught to save money for as long as I can remember.
I saved my $3 a week allowance in one of my grandma’s old cigarette pouches.
But I couldn’t start a retirement account yet, because I had no earned income.
This is where business owners of today can do better for their children and themselves.
You can hire your children.
When they have earned income, they qualify to fund a ROTH IRA.
Imagine compounded tax-free growth over 50 years!
A CPA and I discussed this yesterday.
Here are some things you need to consider before you hire your child:
- The work needs to be actual work. This could be:
- Emptying the trash, cleaning, or checking the mail.
- If they are driving age, making deposits at the bank etc.
- Yes, they can be a “model” for your advertisements/website etc.
- Their wage needs to be fair and reasonable for the work they are doing
- Consider state laws
- Consider child labor laws
- Consider an earning limit of $15,000 which is the current standard deduction. (They won’t owe income taxes if they make less than that amount)
OF COURSE, discuss this with your CPA to make sure you’re doing it all above board. They need to sign off on this.
The potential benefits to the parents are:
- Avoid potential estate taxes in the future
- No gift tax, because it’s not a gift
- Their wages can count as deductible business expenses
- Giving your kids valuable lessons about consistency and discipline
Potential negatives are:
- At age 18, they have rights to their retirement and investment accounts
- Having assets in their name can potentially affect financial aid or scholarship eligibility
- They could become very rich and thank you too much 😊
Check out our newest video: This is the Perfect Age to Retire.
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