Kids, Money & the Pandemic
By: Patrick Cote
The pandemic has affected all of our lives in many ways. For some families, the results have been tragic with the loss of loved ones. For others, they have faced economic hardship with the loss of jobs or businesses. Even if you have not been impacted economically, but have kids who are teenagers or in their early 20s, you may have seen how difficult it now is to find summer jobs.
Getting a summer job was a rite of passage for many of us as we grew up. Having a summer job not only serves a practical purpose of giving kids spending money, it also teaches valuable lessons such as how to behave in the workplace. These early jobs also teach kids how to work well with others and can help instill confidence and self-worth in young adults. From a financial perspective, summer jobs help kids appreciate the value of money (e.g., how many hours of work it will take to buy the latest AirPods from Apple).
For many of our clients at AssetGrade, teaching their kids the right way to handle money is a high priority. Many require their kids to get summer jobs, starting at age 16, to help with that goal.
Unfortunately, many of the traditional sources for summer jobs, such as restaurants, hotels and retail stores, have been negatively impacted by the pandemic. If they are open, they often do not have enough work for their year-round staff now, let alone have the need to hire for summer jobs.
Even through there is not a lot of time left this summer, there are still some options available if your kids could not find summer jobs. The first option is to create their own jobs themselves. One client mentioned that his teenager had set up a small babysitting service for younger kids in their backyard. Other kids have set up online services for photo editing or creating and selling art. If you own your own business, there may be opportunities to hire your kids to help out.
Another thing to bear in mind – it may make even more sense for your kid to work part-time once school restarts. Many of us did so when growing up (my colleagues and I included!), however, it has gotten a lot tougher to work part-time in recent years due to all of the organized activities that have become part of daily life for kids. Things are different now, so your kids may have a lot more free time available while in school. Many activities, such as sports, have been reduced or canceled. In addition, the workload with virtual classes was significantly lower for many kids this past spring. If the trend continues this coming school year, kids may have a lot more time available for a part-time job.
As long as your kids are able to generate some income, it is a great opportunity for them to save in a Roth IRA. Even activities like babysitting or mowing lawns can qualify as income – the key is to make sure your kids track the income as it comes in. Firms like Fidelity, Vanguard and Schwab offer Roth IRAs for minors. Compounding interest makes even small contributions today much more valuable in the distant future (e.g., $1K today would become $47K after 50 years of compounding at 8%!). Your kids might not want to save/invest all of their earned income, so you can always help by matching their contributions with a gift. For example, if they earn $2,000 in 2020 and have $500 to save, you could match the $500 to help them save a total of $1,000.
The bottom line is that even in these difficult times, it is worth the effort for kids to try to find or create their own summer jobs.