Hire your kids instead of paying them an allowance!
It is quite common to see children actively involved in the family business. Even young children can perform valuable services. Many business owners, however, miss out on the major tax savings generated by actually hiring their children and paying them a fair wage for their services.
The expense is tax-deductible to you, and the income is tax-free to them. [Reg Sec 1.162-7(a) ] The tax-free limit for dependent children was $5,350 per child per year for 2007, and it tends to be increased somewhat each year. The amount is equal to the Standard Deduction.
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Mommy I want that new video game! Dad I want the new I-Phone! Grandma I want the new Mac Book! Most parents have heard some variation of the above statements. Parents usually are the primary financial educators for their children. Time after time, I have seen young people receive sizable allowances or inheritances, without a base of knowledge in financial planning. Consider the following five points to assist the children in your life to have a responsible attitude about money.
1) Be a Role Model – The way parents spend money and the way children view money has a significant correlation. Consider discussing the family’s financial goals and plans with the children. How much you share is to your discretion, but include the younger generation in at least a portion of the monthly management. How parents deal with money issues, from the monthly bills to planning family vacations can be important in teaching the children money management and the value of money.
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As a parent, you usually want your children to have the best that life has to offer. Unfortunately, you know that it can be quite difficult to get the money that you need sometimes as an adult… and you wish that there was some way that you could spare your children these same problems.
Luckily, there may actually be a way that you can help your children to prepare for the future today; by encouraging them to start saving money while they’re young, you can set up habits that will follow them into adulthood and possibly even help them to build up a nest egg to help them along their way.
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