Own a Business? Why You Should Hire Your Child This Summer

Many self-employed parents have no idea that it’s absolutely legal—and a great tax move—to hire their own kids to work in their companies. Better yet, it’s a great way to help your kids develop a work ethic, teach them some basic work skills and encourage them to work for their spending money.

Better yet: your business doesn’t have to be a full-time gig. If you work a regular job, but sell items online on the side and report your profit on your taxes as self-employment income, you own a business. You can hire your kid this summer.

The most important things to keep in mind when hiring your kids are to make sure:

  • You keep a log of their job responsibilities and work hours
  • Your kids are old enough to handle the work, and
  • You pay your kids a reasonable rate for their time

Why Hire Your Child?

There are many reasons you might want to pay your kid to work for your. For one, you may have some very basic tasks you need done, from shredding documents to light online research. You might not have time to do it yourself. However, you may have a tough time hiring anyone for an hour or two of work each week.

Second, you may want your child to start working for money, rather than just getting handed an allowance. If you own your own business, you can feasibly hire your 10-year-old. However, there’s pretty much no chance an outside company would be willing to hire a kid that young (unless they’re an actor or model)!

Finally, you get a tax break for paying your kids (it can fall under an accounts payable category of “office help”) AND the money stays within your family.

How to Legitimately Employ Your Kid

The Internal Revenue Service (IRS) is well aware that many business owners hire family members. It’s not a tax scam to do so—as long as you follow IRS rules carefully. Here’s how to hire your child and stay on the IRS’ good side:

Document Your Child’s Work
In case the IRS ever audits you, create a formal job description for your child and keep it on file. Also set your kids up with W-4s (Employee’s Withholding Certificates) and I-9s (Employment Eligibility Verifications) with your business, suggests the legal site Nolo.

You should also keep time sheets for your child’s work, just as you would require of any employee, notes Nolo. It doesn’t have to be fancy. Work logs can be handwritten in a notebook or typed into a computer—whatever is easiest. Just keep consistent records of your child’s hours and the work they did.

Pay Your Kid a Reasonable Rate
You can’t really get away with paying your tween $50 an hour to shred documents and clean your office. The IRS may assume you’re trying to create a nice little way to shield your income from taxes. Minimum wage is probably a safer bet for basic tasks.

However, if your teenager takes photos for your company and posts them on social media, for example, or does similar higher-level tasks, you can pay them a bit more. Check online job sites or call a local temp agency to see what workers are typically paid in your locale for a similar type of work.

And here’s a good one: You actually have to write your child a check or you could transfer money from your business account to their Greenlight card. In other words, you have to pay your working kid real money. You can’t give them pizza or pay for summer camp and claim that those items were in lieu of an actual salary. That’s a big IRS no-no.

What About Taxes?
If your kids are age 17 or younger, you’re not required to withhold Medicare and Social Security taxes from their pay. And if your child is under age 21, their wages aren’t subject to federal unemployment taxes. These rules generally apply if your company is a sole proprietorship or Limited Liability Company (LLC), according to Entrepreneur. If your company is incorporated, or you just want to be sure you’re doing things correctly, talk to a tax pro.

Will your kid have to pay taxes on what they earn from you? Depending on your child’s overall income (are they getting money from anywhere else?) and how much you pay them annually, there’s a good chance your child won’t have to pay any federal or state tax on earnings from your business.

In other words, when it comes to hiring your kids to work in your business, it’s pretty much a win-win all around.

(photo courtesy © Intel Free Press cc2.0)

Greenlight Raises $54 Million to Empower Parents to Raise Financially-Smart Kids

Today, we announced $54 million in Series B funding. We’re thrilled to double down on our roadmap and reach even more families on our mission to empower parents to raise a generation of financially-smart kids. Full press release below.

Greenlight Raises $54 Million to Empower Parents to Raise Financially-Smart Kids

ATLANTA, September 16, 2019 – Greenlight Financial Technology, Inc. (“Greenlight®”), the fintech company on a mission to empower parents to raise a generation of financially-smart kids, announced today it has raised $54 million in Series B funding led by Drive Capital with participation from JPMorgan Chase and Wells Fargo. Existing investors TTV Capital, Live Oak Bank and Relay Ventures also participated. The investment will fuel continued growth and accelerate the company’s development roadmap.

“Greenlight has built an incredible platform that makes it convenient and safe for parents and kids to manage their money. We’re proud to support their growth and help them on their mission,” said Chris Olsen, Partner at Drive Capital who has joined the Greenlight Board. “What attracted us to Greenlight is the scarcity of tech platforms empowering consumers to be more financially successful.”

Greenlight offers a debit card for kids that parents manage through the Greenlight app using flexible parental controls. The company has experienced rapid growth since launching its product in 2017, helping more than half-a-million parents and kids manage daily family finances. 

The Greenlight product allows parents to choose the exact stores where their children can spend, manage chores and allowances, set parent-paid interest rates on savings and more. Kids monitor balances, create saving goals and learn to make real world trade-off decisions.

“At Wells Fargo, financial literacy and helping our clients succeed is a part of our core values,” said C. Thomas Richardson, head of Strategic Partnership Investing at Wells Fargo. “Greenlight offers parents an opportunity to build that core competency of financial literacy in their child’s formative years, through its innovative, interactive and fully digitized product offering. We are impressed by Greenlight’s rapid growth, and we are excited to help fuel the next phase of its development.”

The Series B funding will accelerate Greenlight’s mission-driven roadmap to weave more educational layers into the app experience along with investing, to get kids familiar with the tools to build long-term wealth.

“We’re thrilled to partner with our Series B investors to bring Greenlight to millions of new families and help parents prepare their children for healthy financial futures,” said Tim Sheehan, CEO and Co-Founder of Greenlight. “In the near future, I hope that this generation of kids grow up to spend wisely, learn the importance of saving and feel confident investing to build wealth over the long-term.”

For more information on Greenlight, please visit greenlightcard.com, or follow Greenlight on Facebook and Instagram.

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About Greenlight:

Founded in 2014, Greenlight Financial Technology is an Atlanta-based fintech company that’s committed to empowering parents to raise financially-smart kids. Its groundbreaking family finance product, Greenlight®, is a debit card for kids that parents manage by app using flexible parental controls. Patent-pending technology enables parents to choose the exact stores where their children can spend, manage chores, set parent-paid interest rates on savings and more. Kids monitor balances, create saving goals and learn to make real world trade-off decisions.

The Greenlight Card is issued by Community Federal Savings Bank, member FDIC, pursuant to license by MasterCard International. For more information, please visit: greenlightcard.com.

Can Video Games Teach Smart Money Skills?

XBOX, PlayStation, Nintendo, Steam. If you’re a parent, you’ve probably heard your kids talking about these video game consoles and platforms along with their favorite games like Madden, Fortnite, Mario Kart and Minecraft. With 75% of American households having at least one gamer in the house, we’re not surprised by the wave of Greenlight families sharing their gaming experiences with us. 

Whether your kids prefer mobile gaming or they kick it old school with Nintendo, video games can quickly become a favorite pastime and a recurring cost. Americans spent $43 billion on video games in 2018 and the numbers keep growing, which is why we think video games can be leveraged as an excellent tool for parents to motivate their kids to make smart money decisions. 

Knowledge is power 

With so many different consoles and video game franchises on the market, teaching young gamers to do their research develops smart habits that can apply to future large purchases. Important questions to consider include: 

  • How much does each gaming console and individual game cost?
  • What are the differences between each video game platform and what makes them special? 
  • Which games interest them the most? Which platform is the right fit? 

In Greenlight mom Natalie Jensen Young’s house, her three kids (ages 14, 16, 18) make the best decisions for their individual gaming interests.

“My kids each have different gaming preferences. One loves his Switch and the Xbox. One loves his PS4 and Xbox. One loves her Wii U. They all love the 3DS. They have all saved up for these machines, doing their research, and finding out which games are on which platforms. They get a set amount of money each week for jobs completed around the house — they save up for the games they want.” 

It’s never too early to study the fine print 

Since video games often feature in-game purchases for accessories or level boosts, it’s critical to teach kids vigilance when it comes to downloading games with monthly fees. By linking a Greenlight card to these in-game add-ons, kids gain visibility into miscellaneous charges that are often associated with mobile purchasing while parents protect their own credit cards from these charges. 

“My kids have the cards attached to their XBOX, PC and phone accounts. It’s so much better than having my card attached and them accidentally buying stuff. Plus, it taught them to be careful of things like recurring charges or hidden fees. They are much more careful of what and how they buy now,” shared Greenlight mom Alysson Browning. 

Screenshot of child's Greenlight balances, including an Online Gaming greenlight.

Level up with a video games budget

Due to the fast pace of the gaming industry, new trends can keep prices steep. Use these updates as an opportunity to talk about a magical thing called budgeting. Discuss how your child can’t get the latest game in their favorite franchise without the proper savings or budget.

With Greenlight, parents have the ability to limit how much kids spend on games, which helps eager gamers from going overboard.

Ohio mom Heather Renee Gilbert shared the secret to her game-loving son’s success.

“My son uses his Greenlight card for Xbox games. I created an Online Gaming greenlight for him where I put money specifically for that purpose into it. He earns that money with grades at school and his behavior. Having the greenlight specific for gaming is amazing because if I didn’t set a limit on what he spent on games, he would blow through all the money I gave him on just that. Now he knows exactly what he can spend on his games. No game money in the greenlight means he can’t spend more than what he has.”

Screenshot of Greenlight's spend controls, where parent can manage how much children can spend in certain categories.

Talk that gaming and finance talk with your kids

Raising financially-smart kids sometimes means getting crafty with teaching opportunities. The more relevant the topic, the more engaging the conversation can be. If your kids are into video games, why not start money talks around one of their favorite things?

Greenlight can help

Sign up your family for Greenlight today to explore your own lessons in earning, spending, saving and giving.