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Why I’m Hiring Our Kid as an Employee

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Why I'm Hiring Our Kid as an EmployeeLast week, I had a talk with RB40Jr on the way to school. I reminded him that I have a blog and asked if he’d like to work for me. I could pay him to use his photo on Retire by 40 and also for whenever he takes a good picture that I can use. He’ll be a child model and staff photographer for us. RB40Jr enjoys taking photographs and I want to encourage him to keep at it. I asked how much he’d like to get paid for each picture I use. His answer was “How about $1?” Wow, that’s cheap. However, I told him I’ll pay him $100 per photo. I explained that I’ll put the money in an investment account (Roth IRA) and he can’t get it until he’s older. RB40Jr said okay. Alright, we’ve got a deal. Now I just have to write up a contract and finalize the details. Why am I hiring our kid as an employee? We’ll go over the benefits and then see if they outweigh the negatives. Read on…

The benefits of hiring your kid

There are 3 big benefits to hiring your kid. Let’s go through them one by one.

  1. Teach your kid about personal finance. Personal finance education is so important, but many young adults are woefully under educated about how to run their finances. Most schools don’t have courses on personal finance. Even if they do, most kids aren’t interested in it anyway. It’s up to the parents to teach their kids the basics. My parents taught me to save, but they didn’t know much about investing. I had to figure out a lot of it on my own. Hiring RB40Jr will give us a chance to teach him how to earn, save, invest, spend mindfully, and more. This will help him prepare to face the real world.
  2. Tax savings. This April, I’ll have to send the tax men over $10,000. My blog income was higher than expected last year. That’s a good problem to have, but I want to reduce my tax liability as much as I can. Hiring RB40Jr will give me a chance to shift some income from me to him. In 2017, our last $5,000 of earnings was taxed at 60%. If I shift this to him, then he can keep the whole $5,000. That sounds good to me.
  3. Head start on Roth IRA. Lastly, the earlier you start investing, the better off you’ll be. If RB40Jr invests that $5,000 in a low cost index fund, it could turn into $1.5 million by the time he reaches full retirement age in 60 years. That’s the magic of time and compound interest. He’d have an amazing head start on retirement savings.

The 3 benefits are huge. They will help set up RB40Jr for a successful future. Also, the Roth IRA is tax protected so it’s the perfect vehicle for investing when you’re young. RB40Jr won’t have to pay any tax on that $1.5 million. The future tax saving will be huge what that kind of timeline.

*I first read about hiring your kid on Go Curry Cracker a while ago and I thought it was an great idea. However, the inertia was hard to overcome. The tax saving wouldn’t have been much because I made less back then. He was too small to learn about personal finance as well. In 2017, Retire by 40 made $65,388 and my tax liability shot way up. This year, it’ll be worth it to put RB40Jr on the payroll.

Hiring your kid is more complicated than I thought

There are some big benefits, but I found hiring your kid is not straight forward process. I can’t just pay RB40Jr $5,000 and call it good. The IRS is involved and this means a lot of rules and paperwork. Let’s try to go through the complications one at a time. Feel free to skim these because they will get a little dry. The tax code is ridiculously complicated.

*I’m not a tax expert so I might have missed something. If you’re thinking about hiring your kid, you probably should consult a good tax professional.

1. You need to have a legitimate and profitable business. A business owner can hire and pay their child. This is part of business expense. Retire by 40 is a single member LLC (taxed as a disregarded entity) and I file the schedule C with my taxes. The business needs to be profitable as well. It’s a bad idea to create an unprofitable hobby business to shift some income to your child. This is a red flag for the IRS. (You can hire your kid if you don’t have a business, but that’s also very complicated. Let’s skip it and focus on business this time.)

2. Avoiding social security, unemployment, and Medicare taxes. If you look at your paychecks, you’d see these taxes that your employer pays. Fortunately, there is an exception for hiring your kid. This is from the IRS under family help.

“Payments for the services of a child under age 18 who works for his or her parent in a trade or business are not subject to social security and Medicare taxes if the trade or business is a sole proprietorship or a partnership in which each partner is a parent of the child. Payments for the services of a child under age 21 who works for his or her parent in a trade or business are not subject to Federal Unemployment Tax Act (FUTA) tax. Payment for the services of a child are subject to income tax withholding, regardless of age.”

Whew, it looks like we’re good so far.

3. Avoiding income tax withholding. I don’t want to withhold federal income tax. It will complicate my business accounting because I don’t have to do it now. This one is confusing for a dependent because they can’t claim their own exemption. From what I understand, dependents don’t have to pay any federal income tax if they make less than the standard deduction. That’s $12,000 for 2018. In any event, I don’t have to withhold income tax this year because RB40Jr can claim the exemption in the W4. Here is line 7 in the W4.

I claim exemption from withholding for 2018, and I certify that I meet both of the following conditions for exemption.

  • Last year I had a right to a refund of all federal income tax withheld because I had no tax liability, and

  • This year I expect a refund of all federal income tax withheld because I expect to have no tax liability.

4. Avoiding self-employment tax. This one is somewhat tricky. I have to put RB40Jr on the payroll as an employee and issue a W2 to him at the end of the year. I also need to send his W2 and a W3 to the IRS. The easier alternative is to hire him as an independent contractor and file a 1099 for him. This is a bad option, though. Independent contractors have to pay self employment tax. All those taxes we tried to avoid above will have to paid when he files taxes.

RB40Jr cooking

5. Kid needs to be a legitimate employee. To be legitimate, we need to create a contract for RB40Jr and also keep very good records. I’m going to pay per photograph so it shouldn’t be difficult to keep track of the posts. If I pay him per hour, then we’d need to keep a time sheet. You can’t hire kids to do chores around the house. They need to work on business related tasks. He’ll need to fill out the W4 and I9 forms. The business will need to file a W2 and W3 with the IRS for this.

6. Reasonable pay. The business also needs to pay the kid a reasonable rate. I can’t just say I’ll pay him $5,000 for the year. This one is tricky because rates are all over the place for child model and photographer. From my research, an amateur photographer can charge anywhere from $25 to $150 per photograph. A professional can charge much more. I think $100 per photo is probably too high at this point. I’ll set the rate to $50 per image that I use on Retire by 40 and $10 per image I use on social media. That sounds reasonable to me. Here is a really good reference page on how much photographers should charge.

7. Individual 401(k). Another issue is my individual 401(k). I love my i401(k) and I want to keep contributing to it. However, a business must treat all employees the same. Currently, Retire by 40 contributes 25% of its income (after self employment tax) to my i401(k) as employer contributions. If I hire a full time employee, the business will need to do the same for him/her. Also, I’d have to change to a different plan because the individual 401(k) is only for one person. Fortunately, a part time employee who works less than 1,000 hours per year can be excluded. Okay, it looks like I can keep my i401(k) plan with no change.

8. RB40Jr should file a tax return. All dependent children who earn more than $6,350 of income in 2017 must file a tax return with the IRS. I’m pretty sure RB40Jr will earn less than that so he doesn’t have to file a tax return. However, it’s probably best to file one for him so this looks legitimate.

9. I probably need help from a tax expert. Currently, I do my own business accounting and DIY my taxes. This whole thing is very complicated and I’ll probably need help from a good tax professional.

I’m worn out

Whew, I am beat. Is this really worth it? I don’t know. I already spent many days researching this whole topic and my head is about to explode. The rules are confusing and the information scattered. Why are there so many exceptions?

It looks like we’re okay and I don’t have to make many changes to the business to hire RB40Jr. Basically, I want to make sure we do it right before going ahead with this. The IRS has gone to court over this and they won some and lost some. I’d rather not have to hire a lawyer, though. That probably will wipe out any tax saving we’d get and then some.

I’d love to hear more from someone who has done this. Did I miss anything? Now, we just need to work with RB40Jr to stop sticking his tongue out…

Come back next week to read more about my i401(k). It is worth over $175,000 after just 5 years. I think that’s really good.

The following two tabs change content below.
Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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{ 70 comments… add one }
  • Ernie Zelinski March 15, 2018, 12:32 am

    Insofar as RB40Jr sticking out his tongue, pay attention to this quote:

    “Grown-ups never understand anything by themselves, and it is tiresome for children to be always and forever explaining things to them”
    ? Antoine de Saint-Exupéry, writing in “The Little Prince”

    If you haven’t read “The Little Prince” or even if you have read it, I can share some interesting information about the book that I just discovered and 99.9 percent of people don’t know.

    • retirebyforty March 15, 2018, 9:19 am

      Grown ups never understand kids. I read The Little Prince a long time ago. What’s the interesting information? Thanks.

  • Petra March 15, 2018, 12:42 am

    I’d avoid doing this. I would suspect you’ll be more likely to get audited, and it would be really hard to defend paying your son $50 for these types of pictures…

    • retirebyforty March 15, 2018, 9:20 am

      I’ll need to research a little more. $50/picture might be a little high. Child model makes more than this, though. We need the image anyway.

    • savvy March 15, 2018, 9:28 am

      IIRC, White Coat Investor pays his daughter for work and modeling for his blog. He’s on the straight and narrow so you may want to research the rates he uses. His daughter is a bit older though, maybe 12.

      • retirebyforty March 15, 2018, 1:48 pm

        I’ll check with WCI. Thanks.

        • linda March 15, 2018, 2:15 pm

          hi, retireby40:
          Let me know what you find out from WCI. too huge for me search it out. a link would be appreciated.
          I also think GoCurryCracker used <$400 for his Jr so he doesn't have to file self employment tax.
          thanks

  • Lily | The Frugal Gene March 15, 2018, 1:04 am

    That’s a clever idea! I never thought of that perk! And the skills could grow as RB40 Jr gets older and even starts to write content himself. After your wife retires, will she be part of the blog set up too? I’m a wee bit jelly of all the fun stuff you can play with kids.

    • retirebyforty March 15, 2018, 9:22 am

      Mrs. RB40 edits the posts now. I’d like more help with social media so she might pick that up. She’s not that interested so I don’t know. We’ll see how it goes. I’m thinking about setting up a blog for RB40Jr. He can put all his photographs there.

  • Michael @ Financially Alert March 15, 2018, 1:23 am

    Cool idea, Joe. Even if it ends up being more work that it’s worth, it’ll be a fantastic learning experience for you both. And, when he gets older you can outsource your Pinterest pinning to him. 😉

    • retirebyforty March 15, 2018, 9:22 am

      Pinterest is so mind numbing. I don’t like it at all. I doubt he’ll like it much either.

  • Accidental FIRE March 15, 2018, 2:49 am

    I think this is cool, especially to teach him about money and how ‘work works’. Just be careful, if you’re not nice to him he’ll unionized and go on strike!

    • retirebyforty March 15, 2018, 9:23 am

      Then I’ll fire him. 🙂 Just do what I say. That’s part of being an employee.

  • Chris Urbaniak @ deliberatechange.ca March 15, 2018, 3:40 am

    Good morning Joe,

    “It’s not what you make, it’s about what you keep.” Dad taught me that years ago. Your entire strategy of hiring your kid (and doing it legitimately) directly ties in with that principle.

    “I need help.” Bravo – Never be afraid to ask for help! Recognize when something is beyond your current skill set and realistically future skill set, and reach out. Who knows, I’m sure there’s a good tax expert reading this today who might be a good fit…

    As for Petra’s comment: It’s about risk management. I agree that there is a higher risk of being audited. But how much higher (risk likelihood)? And what are the realistic consequences of an audit in your specific situation (risk severity)? It might be a good exercise to go through at least a small risk management/mitigation exercise to help finalize your decision after going over the details with the tax pro (likelihood vs. severity chart of the risk before and after specific mitigations applied). You’re already taking one major mitigation step, and that is to do it legitimately and follow the rules.

    • retirebyforty March 15, 2018, 9:24 am

      It sounds like many small businesses are doing this so maybe the risk isn’t that high. We just have to get the pay rate right. $50/image might be too high.

  • [email protected] March 15, 2018, 3:48 am

    I think this is a great idea Joe. How great must it feel to be able to offer your son $100 per photo when he was willing to do the work for $1. You may be setting him up to retire by 30!!! Have you bought that domain yet?

    • retirebyforty March 15, 2018, 9:26 am

      That domain was gone a long time ago. 🙂
      $1 is too cheap. It’s not enough to get started with investing.

  • Tom @ Dividends Diversify March 15, 2018, 4:07 am

    Hi Joe, Funny how things in some ways never change. My Dad had both my brother and I on his company’s payroll back in the 70s and 80s. There were similar financial advantages that you mention. Tom

    • retirebyforty March 15, 2018, 9:26 am

      Thanks for sharing. That’s really neat. I didn’t know this rule was around since then.

      • Mr. Tako March 21, 2018, 3:46 pm

        A lot of times I suspect family members are paid “under the table” at small family run businesses.

        Your Dad owned a restaurant, right Joe? Didn’t you ever get paid for the work you did?

        • retirebyforty March 21, 2018, 4:18 pm

          No, they never paid me cash. I think Asian kids are just expected to help with no payment.
          They paid for college so I can’t complain. 🙂

  • Dave @ Married with Money March 15, 2018, 5:02 am

    This is interesting. I’d definitely talk with a tax professional before you proceed.

    My dad hired me when I was younger to help with his business. He would hand some bookkeeping for a few of his clients, and it involved a lot of check sorting. He wanted checks in order, but they always came over in a big envelope totally random.

    I’d sort, organize, and order them for him, and he’d pay me to do it. I don’t remember now how much he paid me but it was split between going into a Roth and being used as spending money. It was cool as a kid for sure.

  • Ms. Frugal Asian Finance March 15, 2018, 5:05 am

    Wow this is super helpful. If my blog starts making a profit one day, I will also hire Baby FAF and try to recruit Mr. FAF too. Who knows hiring an employee would be so complicated. Thanks for sharing the tips, Joe!

    P.S. We also have a lot of seasoning and sauces on the counter right next to our stoves 😀

    • retirebyforty March 15, 2018, 9:28 am

      Spouse is much easier to add. Kid is more complicated. The tax rules count spouse as a business partner already.

  • Mr. Freaky Frugal March 15, 2018, 5:12 am

    Great idea, Joe!

    Maybe I missed this in the post, but what are you going to do with the money that RB40Jr earns? Are you going to use it for a college fund, invest it for him, just keep it, or what?

    • retirebyforty March 15, 2018, 9:28 am

      I’m going to put it in a Roth IRA. I already open an account for him at Fidelity.

  • Frugal CPA March 15, 2018, 5:31 am

    Hi Joe,

    I’m a CPA and work with a lot of small business owners. We always suggest this idea for as a way to shift income. As you can attest, paying a child has the potential to save money in regards to taxes. I’d be happy to talk through how we handle this for our clients and answer any questions you might have. Just send me an email.

    • retirebyforty March 15, 2018, 9:29 am

      That’s great. I’ll PM you a few questions. It sounds like this is more widely used than I thought. Thank you.

  • Marc March 15, 2018, 6:12 am

    That’s interesting to know that you wouldn’t have to switch out of your individual 401(k) if he works less than 1,000 hours per year. I have an individual 401(k) as well and I’ve always wanted to avoid hiring an employee partly because I don’t want to lose that.

  • Dividend Growth Investor March 15, 2018, 6:31 am

    This sounds like a great idea Joe. There is a lot of paperwork involved in order to establish the paper trail. If you get audited, you do need to support the fact that this is indeed a legitimate business transaction, and not done merely for tax purposes ( substance over form). It looks like you have thought about that however.

    I thought about doing the same thing, but I decided against it. While I may save on taxes today, and the kid may have a Roth IRA at an early age to jump start compounding, I am not sure how the kid would feel about their childhood picture be all over the internet. Perhaps the best opportunity would be to encourage them to open a Roth IRA when they get their first job as a teenager, which would be the best teaching opportunity for them.

    Either way, good luck in this project!

    DGI

    • retirebyforty March 15, 2018, 9:32 am

      It’s too late for us. RB40Jr is already on the internet. I’ll probably stop using his images soon. Big kids are probably more self conscious about these things.

  • Mrs. Groovy March 15, 2018, 6:58 am

    This is a great idea, Joe!
    One question — You said you won’t need to keep a time sheet for RB40Jr because you’re paying him per photo, and not by the hour. You also said you can exclude him from the i401K benefit because he’ll be a part-timer working less than 1,000 hours a year. Won’t you have to keep a time sheet to prove that?

    • retirebyforty March 15, 2018, 9:32 am

      You’re right. I’ll have to keep a time sheet too… We’ll just say 1 hour per photo. That’s reasonable. Thanks.

  • [email protected] March 15, 2018, 7:57 am

    When we set up our business last year, we went through all the same steps to set up Tyler as an employee so I don’t think you’ve missed anything major.

    Especially for a travel blog, photographs are a necessary expense and something he can do as a toddler. Rig now he gets paid $10 per picture but as he gets older he can get paid for writing articles as well.

    To get him set up, he signed a model release, an employment agreement, a W4, and an I9. Everything any employee would have to do.

    • retirebyforty March 15, 2018, 9:33 am

      That’s great! $10 per picture isn’t bad. Is that a normal rate? I’ll PM you with a few questions.
      I didn’t know about the I9. Thanks!

  • Jared March 15, 2018, 8:23 am

    Thanks for doing the hard work for the rest of us so we get to learn from your experiences ;P

    I’d love to read a follow up post once you’ve done this, especially for point #4 – putting your kid on the payroll. How do you actually do that!

    • retirebyforty March 15, 2018, 9:37 am

      I think you just have to pay regularly. I’ll pay him monthly and send it directly to his Roth IRA.
      You can’t just give him cash. It needs to be on record.

  • Jim @ Route To Retire March 15, 2018, 9:01 am

    Wow, this does seem more complicated than I thought it would be. I’m curious how the part of the conversation actually went with your son when you told him he wouldn’t get the money until he was older. It’s no fun if he just said “ok.” 😉

    I’m hoping to do this with my daughter as well, but I’ll probably wait another year or two since my site is just starting to make some money. Consider this one bookmarked for future use!

    — Jim

    • retirebyforty March 15, 2018, 9:38 am

      He doesn’t mind getting the money later because he’s used to saving already. He put all of his gift money away and we rarely spend it. I’m sure that will change as he gets older. Right now, 65 sounds the same as 15. 🙂

  • Jillian March 15, 2018, 9:14 am

    I do hire my 10 year old for renovation projects on our rentals and creating images in Canva for my blog. There are a few IRS cases that I researched that help set the precedent. The overall idea I came back with is that is has to be reasonable pay for that kids age and skill set. It’s OK to pay a 7 year old $3 an hour or a 10 year old $5 an hour if they have limited special skills. The test on if it would hold up in an audit would be, “Would someone else pay that rate to your child?” If no one else would pay $50 for your kids photo or image, it might not hold water. I pay my 10 year old $1 per social media image because he could get gigs on Fiver at that rate. So it’s easy to prove that is his true rate. I pay him $5 an hour as a construction helper because other contractors would pay $5 an hour to have a helper cleaning the site, hauling garbage and setting flooring boards. I think if you price his work that way, you’ll be safe. Just from what I’ve researched.

    • retirebyforty March 15, 2018, 9:41 am

      Great! Thank you for your input. I don’t know if someone else would pay $50/image for my particular child, but they pay that kind of money to other children. My kid is a lot cuter too. 🙂 I’ll work on it a bit more. We might have to go down to $20/image or something like that. It’s hard to price this kind of service because the pay varies so much. Professional model and photographer get paid a lot more.

  • FullTimeFinance March 15, 2018, 9:44 am

    So I guess the question is, if your in the 22 percent bracket is 1k in tax savings worth the extra work versus just giving a gift under the minor pass through tax rate?

    I’m not sure but it’s intriguing at least.

    • retirebyforty March 15, 2018, 1:50 pm

      In 2017, we’re in the 25% tax bracket, but the transition from 15% to 25% was painful. We would have saved $3,000 in taxes if we made $5,000 less. That’s 60%. It’s due to dividend income and a few other things.
      I think the big gain would be from investing in the Roth IRA. The kid wouldn’t have to pay tax when he withdraw. That’s huge over 60 years.

  • Revanche @ A Gai Shan Life March 15, 2018, 9:58 am

    “Now, we just need to work with RB40Jr to stop sticking his tongue out…”

    That’s part of his charm right now! Leave him be 😉

    In general I think it’s a good idea if you can set a reasonable price for the photos that won’t invite questions from the IRS. But wait, as a child and not a legal adult, is he allowed to sign his own I-9? I assume you’d end up signing it for him as his parent/guardian.

    • retirebyforty March 15, 2018, 1:51 pm

      Alright… I won’t bother him too much. It’s ridiculous, though. We can’t get any good picture anymore. He used to smile for us when he was young.

      I will check if he can sign his own W4 and I9. I don’t see why not…

  • jim March 15, 2018, 10:12 am

    You’re a horrible negotiator. 🙂

    You could have locked that kid into a contract for $1 stock photos for years!! 😉

  • Angela @ Tread Lightly Retire Early March 15, 2018, 11:17 am

    My one big concern about second generation FIRE is setting our kids up TOO well. My parents could have paid for 100% of my college, but they didn’t, and I think it’s worked out better for me this way, as much as I would have liked to have come out of college completely debt free.

    • retirebyforty March 15, 2018, 2:01 pm

      We’ll have to see how it goes. I’d like to pay for our kid’s college. Starting out with debt is no fun.
      I’ll make sure he understands personal finance too. That’s hard when you’re young.

    • jim March 16, 2018, 10:28 am

      I think it can be a tough balancing act between not spoiling your kids and not making life too difficult for them. How much of college should be paid for is one of those gray areas where its hard to know how much is too much or how little is too little. Plus college costs and affordability are something that change greatly over the decades so what worked for us 20-30 years ago may not work the same today. Every kid and their college situation is going to be different too. And when we look back at our own experiences we might walk away with a positive or negative feeling about our own college financing but its hard to know how it would have worked out otherwise cause we never tested it. I mean I might think I was helped by having to pay part of my own way and I’m sure it did help me some, but what if I’d had a 100% free ride instead? Maybe that would have helped me have more time to spend studying and get even better grades and get a better job easier and end up ahead overall, even though I didn’t ‘earn it’ and learn lessons about personal finances by taking debt.

      Its a tough one.

      • retirebyforty March 16, 2018, 1:44 pm

        Right. I don’t want my kid to be saddle with a six figure student loan. That’s a huge hole to dig out of.
        My parents paid for most of my college education. I worked a bit, but didn’t make much money at all.
        I knew they worked hard to get me there so I was very appreciative. That was a very important point to me.

  • fin$avvypanda @ finsavvypanda.com March 15, 2018, 12:09 pm

    d’oh! I was going to mention about RB40 Jr. becoming your VA for Pinterest but it looks like Michael already mentioned it above lol! I’m just a bit slow here…

    And I didn’t know that you don’t like Pinterest. I personally find it less overwhelming than other platforms (probably because it doesn’t require me to be “social” haha).

    Anyway, this was a great post! It definitely looks like you did a lot of research on this topic so I’m not surprised that your head was about to explode — I’d feel the same too.

    I never thought about hiring my kid as an employee, but I have thought about teaching them how to earn their own money. They will realize that it’s not easy to come by, and it would prompt them to think further on how to make money work for them as they grow older. I find that putting them in real “life experience” will teach them about personal finance (i.e. how to save, invest, spend wisely, etc.) — something that school (and even parents in general) don’t teach!!

    Overall, excellent post! It will be interesting to see RB40 Jr’s next model photo haha!

    • retirebyforty March 15, 2018, 2:04 pm

      I don’t like Pinterest because it doesn’t work that well on my phone. Pinning feels like work to me too. I’m not good at it.
      Yeap, I want to make sure our kid understands personal finance before he leaves home. That’s hard to pick up on your own. Thanks!

  • Kristine March 15, 2018, 12:22 pm

    Yes yes yes! I will absolutely be doing this for my future offspring! Looking forward to updates on the first year. 🙂

  • Kris March 15, 2018, 12:46 pm

    Great idea, this gives RB40Jr. an idea on how money works especially on how it grows on an account like an IRA. Your right, learning something from a parent sounds more meaningful than from school because you can show him examples of how the money grows logging on the account and show much more is in there. Hopefully it will give them the idea to save more so he can see it grow.

  • Frankie @ Fully Franked Finance March 15, 2018, 4:11 pm

    Fascinating Joe, and great to be thinking a little creatively.

    My motto is to keep things simple, so I don’t think I’d personally go down this path even if it saved a few thousand dollars. But sounds like there could be some other great benefits for you and your son, especially the learnings that would come from all of this.

    Cheers, Frankie

    • retirebyforty March 15, 2018, 9:11 pm

      Right. The amount won’t be big. 60 years is a long time to compound, though. It might be worth it.

  • Lazy Man and Money March 15, 2018, 6:10 pm

    I wrote about this back in 2013: https://www.lazymanandmoney.com/should-i-look-into-baby-modeling/. I determined there was probably no reasonable “work” that my 7 month could do (as a model) that would be considered “reasonable.”

    Maybe as a photographer that changes. I was also thinking of hiring as an article proofreader. I want my articles to be understandable at nearly any reading level, so why not see how they work for a 5-6 year old?

    • retirebyforty March 15, 2018, 9:12 pm

      I don’t think my kid can understand this. He can read it, but probably won’t comprehend much. Maybe in 3-4 years.

  • millionaireminter March 15, 2018, 8:06 pm

    Agreed with your suggested method here. Love the fact that the tax law allows this. Great to see others taking advantage of this incredible opportunity to benefit their children’s financial future as it is an extremely beneficial thing to start with a $1,000 or so in an IRA at a young age for a child. This can grow tax free for so long giving them retirement funds. Great article! keep up the good work!

  • Cubert March 16, 2018, 4:25 am

    Hey Joe … I think the White Coat Investor has this set up for his kids as well. Maybe you got the idea there, but if not, check out his stuff to see if there’s any tidbits on streamlining this. He also pays his kids for photo modeling.

  • David @iretiredyoung March 16, 2018, 5:49 am

    I think this is a great idea Joe, helping RB40Jr learn about personal finance in a close to real world way. One thing that might be worth considering is to split the payment so that RB40Jr gets a bit of cash in his hand (perhaps just a dollar or two is fine), with the rest going to the investment account. The money in his hand may help him stay interested after the initial novelty wears off.

    • retirebyforty March 16, 2018, 1:38 pm

      Good idea. I’ll give him some cash too. He enjoys saving so I don’t think it’s a big deal for him. He’ll probably put the extra money in the safe.

  • Jeff March 16, 2018, 10:24 am

    Is there a minimum age though or is it different as a independent contractor? Always thought about the countless hours I worked as a kid at my parents small business (all unknown to the feds).

    • retirebyforty March 16, 2018, 1:39 pm

      There is an age thing, but it doesn’t apply if you’re hire your child. I worked a ton of unpaid hours at my parents’ restaurant. 🙂

      • ButterRiceDDS March 16, 2018, 4:44 pm

        Make me wanna open private practice sooner.

  • mary w March 16, 2018, 12:49 pm

    Whatever you decide to pay him, let him keep a bit of the money. Maybe the $1 that he initially requested.

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