Child Labor is Good
3 Ways To Profit From Hiring Your Kids
When it comes to accounting, I have the full panoply of high priced helpers. But here is an additional auditor that could serve you well: your kids.
- It will teach them a little math and make them a little money. Every time you get a personal bill, consider deputizing your minor kids (I start at around 7) to double check them. You can do this at restaurants, traveling, and with the mail. You can even have them listed on accounts as agents with access to the vendors. If nothing else, this should familiarize them with personal finance and reasonable costs associated with running a household. It can be a painless and easy way for them to learn arithmetic — estimating and calculating by paying tips and other incidental expenses. They will also learn attention to detail. Once they earn $7k per year, they will be able to max out their IRAs.
- It will save you real money and will do so at a lower time value of money. My deal with my three kids is as follows. They earn finders fees of 10% on any money that they save me that would otherwise be borne by the family. They earn 50% on any money that would otherwise be spent on them directly (for example, if they find and earn scholarships). Some of these are as big as getting into the Naval Academy and eloping (a long-term suggestion for my daughter who would get 50% of the cost of a 4-year college and 50% of the cost of a wedding). Some are as small as finding online coupon codes for regular expenses or reducing the electric bill beneath the same month of the previous year by turning off their lights.
- It will orient the family around continuously looking for an edge and exploiting asymmetric attention to detail. In my experience, about 75% of vendors charge accurately, 5% undercharge, and 20% overcharge. Correcting that 20% can be a substantial edge. For some recent examples, United (UAL) offers $500 apology vouchers for their (consistently complaint-worthy service). So, if a family has a subpar service, then it is key to complain separately as individuals. A child can knock out five complaints, collect $2,500 of vouchers for the family, and get a $250 cash award for his troubles which typically run at about 5 minutes per firmly worded complaint. I would net $2,250 at no cost in time and my kid is earning $600 per hour which is above market for kindergarten. He can sign us each up for AARP (there is, contrary to expectations, no age limit) for $12.60 per year for 5 years and claim $400 per person (five in this family) savings on British Airways business class flights. He gets $200 for his trouble which more than compensates him for the membership costs. One final example is to have the kids cancel service (cable, etc.) before extended vacations and re-up them afterwards. The vendors consistently offer freebies to come back, even if that was always your intention.
While I have moved on from much of my childhood antics in order to pursue more scalable prey, one thing nice about kids is the ability to pass on one’s valuable by less scalable tactics to them. Even saving just $100 per day is pretty good for a little kid and it will be the same skillset that will serve him well when the stakes are many magnitudes that scale in their future. For further reading on the topic of kids and money, you might enjoy reading my previous post on Reducing Kid Spoilage as well as The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money.
Halfmore gets kids compounding wealth from a young age with a custodial Roth IRA.
· Legal arrangement setup
· Chores management
· Payroll processing
· Work history documentation
· Tax form generation
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