Encouraging Kids To Earn Money

Finding ways for kids to make money shouldn’t be too hard if you get creative. If your kid is old enough based on the laws in your state, they could get a part-time or full-time job. Some states allow teenagers to work as early as 14 with limited hours or with a work permit. Other states have no restrictions. Kids can work at the grocery store, gas station, fast food restaurant, or any other job that hires entry-level positions with flexible schedules. Working a traditional part-time job isn’t the only way to make money as a kid. If your kids are like I was, your kid can start their own business. When I was growing up I had a pet sitting business, a lawn mowing business, and a trading card game reselling business. Technically, none of them were official businesses, but I felt like they were businesses and I earned money.

Here’s a list of 13 ways to make money as a kid.

• Apply for a real job if they’re old enough
• Work in a parent's business
• Make something to sell locally or online (crafts, homemade baked goods, etc)
• Become a pet sitter in your neighborhood
• Start babysitting younger kids
• Offer simple handyman services
• Start a landscaping company
• Wash or detail cars, boats, or RVs
• Organize a yard sale and arrange a commission
• Shop at yard sales then resell items at higher prices
• Offer a snow clearing service
• Ask neighbors what chores they need taken care of
• Buy items in bulk and sell at a profit

Related: ChooseFI’s Favorite Side Hustles

Organize Your Child’s Income

It’s important to track your child’s income as they begin their first job or side hustle. Thankfully, tracking your child’s income is easy with the right system.Opening any of the following online checking or savings accounts in your child’s name is an easy way to organize their finances. Plus, this is an excellent way to teach them the value of saving money and tracking personal finances.

What Kids Can Do For You If You Own A Business

If you’re a business owner, you are in a unique position to help your children earn money. While traditional employers may not allow your children to work until they are teenagers, you may have tasks your children can complete and get paid for. That said, you shouldn’t just “hire” your children and pay them if they don’t do any work. Any work you hire your children to do should be tracked and noted. You need to pay them a competitive wage for what they do, too. For instance, if you typically pay $5 to purchase a stock photo for your website, you could instead pay your child $5 for their pictures. That said, you probably shouldn’t pay your kid $500 for an awful picture. You’d likely be pushing it if you ever get audited. To get an idea of what works and what wouldn’t, you should get in touch with a tax professional that can evaluate your business and situation. They should be able to make a recommendation based on your particular circumstances.

How Kids Can Start Their Financial Independence Journey Early

So why is earning money as a kid so important? First, kids probably won’t be earning a ton of income. That means the income they do earn could be tax-free. If it isn’t tax-free, it should at least be taxed at a relatively low tax rate. Earned income should also allow most children to open and contribute to retirement accounts like Roth IRAs. A Roth account is ideal in many cases due to a child’s relatively low-income tax rates. The money will grow and can eventually be withdrawn tax-free in retirement. If your kid is under ten, they could leave that money alone and benefit from the power of compounding for 50 years or longer. Using 8% returns and the Rule of 72, your money would double over 5.5x over 50 years. In addition to the potentially huge tax benefits and long-term benefits of compounding, this also helps develop good habits. Most people don’t learn to start saving until much later in life. If you can build the habit of saving early, you’ll be setting your children up for a lifetime of financial success.

Related: How To Open A Roth IRA For Kids And Teach Your Kid About FI

Your Child May Need To File A Tax Return

Regardless of whether your child plans to invest or not, earning income means they may need to fill out a tax return. If your child works a job and has federal income tax withheld from their paycheck, they may need to file to claim a refund. If your child runs a business, they’ll need to report their earnings as well as pay any applicable federal income tax and any applicable self-employment tax. Since you need earned income to contribute to a retirement account, it’s important to report this income and pay the applicable taxes to unlock the tax benefits of a Roth IRA. Learning how to make money as a kid may be fun. It can also be an important lesson on how to save and how our tax system works. Make sure your kids understand the whole process to help better prepare them for life after they move out.