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Employment ideas for Your Children

Employment ideas for Your Children


Helping your child establish a multi-million-dollar Roth IRA portfolio relies on your being able to identify work for which he or she can be paid.


You may wonder what kind of work a young child might do to earn $6,000--the maximum amount allowed in 2020 for funding a Roth IRA.)


The IRS might be skeptical. The answer is: Lots of things. There’s no reason why you can’t hire your child to do work around your house and lawn or work around your office.


If you run your own business, chances are that your business has a website and/or produces various promotional brochures. If a family theme fits in, you can use young children as models and pay them the going rate. Such pictures on your website or promotional brochures can help illustrate the benefits of your business.


As your children grow older, the range of possible employment opportunities will expand, inside and out of the office. Besides the tasks that first come to mind (filing, cleaning, grounds keeping, babysitting), your teenager (or pre-teen!) might help you establish a social media presence or do market research among peers.


When the child is off to college, you might buy a house near campus so your live-away collegian can avoid dorm fees while earning a management fee if you rent rooms to other students.


Use this strategy but don’t abuse it. Pay a fair wage for the work that’s actually done. Make sure that you keep records to sustain your write offs. Then encourage your child to contribute these funds to a Roth IRA. 

Will it worth it? Yes. Tax-free compounding will provide outstanding results. Let’s assume that $2,500 is contributed to a Roth IRA on the child’s fifth birthday and that another $2,500 is contributed on his or her sixth birthday. That $5,000 investment would grow to almost $1.6 million by the time the child is 65 years of age—based on an average annual return of 10%. If that same strategy is used to invest in a diversified group of DRIP stocks, only the dividends will be taxed on an annual basis. The compounded growth will be the same as within the Roth, but the proceeds of any sales will be taxed, albeit at favorable long-term capital gains rates.