School’s out for the Summer! This can be great news if you are a student and not-so-great news if you are a parent. But Summer can be a prime opportunity to teach your children some financial responsibility.
I believe the majority of high school students have some sort of Summer job – babysitting, lifeguard, bank teller, etc. These types of jobs can help kids gain valuable work experience even if it isn’t in their future career field. Learning to work with colleagues, working as a team, and earning a paycheck increases dependability, teamwork, and gives valuable insight into human nature.
Summer jobs aren’t just for high school or college students. Summer is a great time to establish responsibility in younger kids as well. Even though my kids have many activities such as swim lessons and baseball, we leave them a list of chores to do every day. The standards on the list are make their bed, pick up their room, read for 30 minutes, or help start dinner. Some parents pay for these types of chores which can establish good characteristics, but I would challenge to go beyond the “normal” responsibilities.
When I was 7 years old and growing up on a farm, one of my summer jobs was to pick up any nail I saw. My dad paid me 1 penny per nail. I can’t tell you how many nails I found walking around the farm with my head down the entire time!
For children ages 6-12, there are many jobs around the house or around the neighborhood that they can perform, and for many, these jobs make them feel special and build self-worth. For example, our kids are responsible for watering the outside flowers and plants when needed. We also pay a neighbor boy to pick our mail and paper during vacation.
So, what should a kid do with all this earned income this Summer? Well, according to Justin Nichols’ previous blog, save 1/3, give 1/3, spend 1/3. Here’s an idea for saving 1/3. Have your child open a ROTH IRA. Amazingly, there is no minimum age requirement to open a ROTH IRA. The only requirement is that the child have “earned income.” According to the IRS: “Earned income includes all the taxable income and wages you get from working. There are two ways to get earned income: You work for someone who pays you or you work in a business you own.”
Here’s the grey area – payment for household chores by your own children probably don’t qualify as “Earned Income.” However – the income received by the neighbor boy picking up your mail and paper does. Payment from mom or dad’s business probably does. Payment for mowing grandma’s lawn – maybe?? (This is where creativity gives accountants and IRS agents nightmares!)
Bottom line – make sure your kid is taking advantage of that Summer “earned income” by knowing your saving options. Because they can only buy so many DQ blizzards!