Want to teach your kids about money? Hire them.
With side hustles and small businesses easier to start than ever, many parents working toward financial independence have discovered a surprising benefit to self-employment: a practical lesson in financial empowerment for their children.
“Entrepreneurship transformed my daughter from a shy kid to a CEO kid,” says Rozalynn Goodwin, whose daughter Gabby helped her invent and patent a line of hair clips. “My daughter had struggled with her confidence and dark skin, and now I see the anticipation, excitement and wonder in her eyes when she talks about the business she helped create.”
For some business owners, it is permissible to employ your children and pay them a salary even at a young age. Children under the age of 16 can be employed if they “work in non-agricultural employment in a business owned solely by their parents, or by persons replacing their parents, in accordance with an exemption clause in the Standards Act fair work. With the right conversations and advice, earning an income can help children develop good financial habits early and qualify them for tax-free investment growth in a custodial Roth IRA.
Here’s what the experience looks like for four families who employ their children.
A Side Hustle t-shirt that brings in $50,000 a month
Ari El Simpson and her husband James started “a trendy T-shirt business” called Tees Of Life in May 2020. Simpson has worked in IT at a bank for 15 years and James is a barber. They spent $45 buying a used t-shirt press from Facebook Marketplace and $55 buying blank shirts from S&S Activewear.
The Simpsons design t-shirts with sassy self-love phrases, and their three children, ages 17, 13 and 7, work at the company. The family still does most of the ironing of the t-shirts themselves, but they have also hired three part-time outside team members to help during the week. Each child earns money working in the business and their parents teach them how to save and budget their income.
“My eldest daughter prints shipping labels, my son helps with the ironing, and our youngest does things like cleaning,” Ari says. “When they get paid, we teach them the importance of spending wisely, saving, and how this business has helped our family build generational wealth.”
The Simpsons started pressing T-shirts as a side business in their home, and the business grew exponentially due to the pandemic. Tees Of Life is now bringing in $50,000 per month.
“We started our business in our house, literally in our bedroom,” says Ari. “Initially, we built lean business. We used our personal social media accounts to advertise and were surprised at how much people wanted our t-shirts. We made $6,000 our first month.
Since the employment of children is subject to strict employment law limits, it is important to consult a tax professional to ensure that your children are properly integrated into all business activities.
A family business that attracts frontline workers
Aneesha Smith has been a nurse for 22 years and started selling badges for nurses on Etsy in 2016. Her e-commerce brand, Reflections By Zana, was a side hustle until the pandemic hit, during which income exceeded $10,000 per month. Smith retains her full-time job, but her husband Quandell quit his job to take a role in the business.
“As a creative person, I always wanted a side hustle,” says Aneesha. “I missed workplace representation as a black nurse, and wanted to create something for nurses of color.” Badges attach to lanyards or security passes, and Aneesha wanted to create products that appealed to and openly resonated with black women.
Smith’s three children, ages 15, 17 and 25, help with inventory and fulfillment. The family houses, designs, packs and ships over 85% of the product line from their home and a small storage unit.
“We pay our two youngest $12,000 a year, and our eldest is a W2 employee who receives a salary,” says Quandell, who manages work schedules, budgets and execution for the company. do as guidelines for their children’s income.
The Smiths have monthly meetings with their children to discuss their personal financial goals.
“In our house, savings are sacred,” says Aneesha. “We teach them to spend, save and be cost-conscious with their money, because life can be expensive. We try to help them see life lessons not lectures by charging them for some of the things they want, and we want to instill that mindset in them early.
A helping hand in the family franchise
Hiring your kids doesn’t always have to be entrepreneurial. Hourly work is how many young people learn the value of a dollar, and it can help them develop job skills they can take with them throughout their lives.
“I teach my daughter that money has value, its importance and how to respect it,” says Marshall Terrin, owner of Breathe Oxygen Bar, a wellness company with nine locations in Las Vegas and Orlando. Terrin’s 13-year-old daughter works in a general help role at some of the family’s locations. “She helps customers settle in and helps sellers grab items,” he says. “We’re limiting her work, but she’s expressed an interest in working more in the business as she gets older, and she’s learning a lot about money.”
You can pay the kids up to $12,000 a year without them having to file a tax return, and that money is tax-free. Many business owners who are parents pay their children so they can reduce the overall taxable income of their business while helping fund their children’s education funds or other savings plans.
Related: I make my children millionaires by hiring them and investing their earnings. Here is my 10 step guide
A self-funded barrettes company
Goodwin, the owner of the barrette business, co-founded GaBBY Bows with her daughter Gabby because the family couldn’t find barrettes that worked.
“We were replacing barrettes every two weeks, and it was a constant frustration for me and my daughter,” she says. “Our pastor was online and saw the group of moms talking about our frustration. He said: “It looks like a market you have to enter. Goodwin broached the idea with Gabby, who was five at the time and loved the idea of making bows that worked for her. Gabby, now 15, is the company’s CEO under her mother, and her role includes being the company’s spokesperson in branded images and videos. The parents advise their two children on saving and investing.
“I’m lucky that my job is [to be] the first investor in my daughter’s dream,” says Goodwin. “Although we had ample credit and liquidity, the banks weren’t lining up to try and invest in a seven-year-old’s dream. His parents had to do it, and that’s a lesson that my children have seen.
If you’re looking for a way to fund your child’s college plans or savings accounts — and want to teach them about money along the way — starting a business and hiring them could be the way to go. Take the advice of these families and consider employing your children to teach them about financial independence.
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