Child labor laws prevent putting kids to work in coal mines and sweat shops, but that doesn’t mean that your child (or grandchild) shouldn’t get a job.
Paid work imparts a litany of benefits on teens and tweens and not just in the form of cash. Kids as young as five can start to learn about money management and wise decision-making by managing their own wages. Some experts believe that work experience on a resume can improve college chances, too. And, if the money is wisely managed, it can make your kid financially independent long before his or her peers. In other words, putting kids to work provides a huge benefit to your child.
Putting kids to work
“A lightbulb goes on when a kid makes the connection between working and spending,” says Gregg Murset, founder of BusyKid, a system that pays kids for chores. “When they realize how much effort goes into that expense, they make better financial decisions.”
It’s pivotal that your child makes this connection before college, when incessant easy-money pitches from credit card and student loan purveyors can cause kids to build crushing amounts of debt. When your child has money to manage while still at home, it makes it easy to talk about smart saving and investing strategies. And, the younger you start, the more likely that the kids are still interested in your opinion.
How can you help your child get a job and learn to be money-smart? It depends on their age.
Ages 5 to 11:
It’s unlikely that a five-year-old is going to be able to get a job out in the big wide world. But your child can work for you by providing services for either your household or your business.
Murset’s company encourages parents to pay kids for household chores — maybe 25 cents for making his or her bed (or your’s); 50 cents for taking out the trash; and, perhaps, $1 to vacuum or do the dishes. His company helps parents pay their kids weekly for completed chores and divide the pay into separate accounts for saving, spending and giving to charity.
It’s a great way to teach work ethic and money-management skills, while lightening your household load, he says.
If you have your own business and can find legitimate jobs for your children to do for your company, you could claim a big tax break too.
How so? Every dollar you pay in wages reduces your businesses’ taxable income. Meanwhile US tax law exempts children working for their parents from paying Social Security and Medicare taxes, as well as income taxes on up to $12,000 in wages.
How much can employing your kids save you in tax? Let’s say you have two children and pay them each $10,000 annually. That reduces your business income by $20,000, which cuts your Social Security and Medicare taxes by $3,060. If you’re in the 25% federal income tax bracket, you save another $5,000 in income taxes too.
Of course, that $8,000 in tax savings cost you $20,000 in wages. But there’s nothing preventing you from telling the kids that they need to save the bulk of their wages for college. Indeed, according to the experts at Nolo Press, you can even pay your child’s wages into a Roth IRA, a 529 college savings account or a custodial account that you control until the child is 21. But be sure to keep good records of what the child is doing and the hours he or she is working, just in case you’re audited. (Nolo has a nice primer on this tax break here.)
What can a five- to 10-year-old legitimately do? One realtor said he used his youngsters in his advertising and social media, paying them to be models. One landscaper has his sons do client weeding and trimming during summers and school breaks. It saved on babysitting and the boys became so skilled that his summer work is done in half the time, giving him afternoons off. Can your kids organize the snack and drink cooler for your rideshare business? Hand out fliers for your nursery school? Stuff envelopes? Design the kid’s menu for your restaurant?
Ages 12 – 16
Older kids can branch out to find work in the neighborhood. Neighborhood website, Nextdoor, can help. The site allows you to post Facebook-like messages to your neighbors. It is regularly used by teens and tweens to market their availability to tutor, mow lawns or run errands.
Murset’s son started a business hanging Christmas lights for neighbors. Although it’s a short-seasonal business, his son earned about $4,000 putting up and taking down lights. Now 18 and off at college, he passed the baton to his 14-year-old brother.
Bambino, meanwhile, allows kids as young as 13 to advertise their availability and qualifications to babysit. The site has a social media component that gets recommendations from past clients.
Fiverr is another site that allows kids as young as 13 to sign up and offer services. The jobs on this platform are wide-ranging. You can offer to do anything from creating video endorsements on YouTube to giving advice. Most jobs start at $5, so experts suggest that you be specific about what’s provided in your offer. For instance, you could offer to help a business set up an Instagram account for $5; or provide 10 minutes of social media advice. The bad news? The site takes 20% of your revenue — even of your tips. So make sure you charge enough to make up for the fee.
Ages 16-18
Once your child is able to drive, he or she has a host of local job options, ranging from working at McDonalds to manning a counter at the local hardware store.
However, there is still a substantial tax benefit of hiring the child yourself. The tax exemptions on your child’s wages of up to $12,000 still apply. And, now, your child is likely to be savvy about many technological challenges — from troubleshooting for spy and spamware on your laptop to managing your social media accounts. Got a math whiz? Hire him or her to be your bookkeeper. Your budding artist could design your corporate logo. A kid with a great personality could answer phones or help with sales.
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