Ask an Advisor: I’ve heard there are ways I can use my business to start saving for my kids. What is the best way to do this?

Ask an Advisor: I’ve heard there are ways I can use my business to start saving for my kids. What is the best way to do this?

That’s smart thinking! It takes true entrepreneurial spirit to see your business not only as a vehicle for your own success, but also as a way to give your kids a financial head start. This is the kind of long-game, strategic mindset that turns your hard work into a lasting family legacy.

When we invest our time, energy, and effort into building a business, it’s not just about generating income today; it’s about putting that income to work for the people and priorities we care about most.

New Rules, New Opportunities

One of the unique benefits of business ownership is access to opportunities that many people never even hear about. Gen X and elder Millennials are playing by a different set of rules than their parents, and rather than jumping on the bandwagon about Boomers having it easier, some of us are more interested in focusing on the new rules that work in our favor. 

For example, the 2017 Tax Cuts and Jobs Act and its recent extension were moves that some critics argue primarily benefit wealthier households. Regardless of the debate, as responsible stewards of our wealth, it’s up to us to use what’s available—ethically and wisely—to benefit our families and communities.

Hiring Your Kids: A Simple, Effective Strategy

One of the most straightforward ways to use your business to benefit your children is to hire them for legitimate work. Sure, I did some filing at my dad’s law firm when I was growing up; it was a formative learning experience that helped inspire me to go into business for myself. But when it came to financial gain, I just spent my earnings on baseball cards and video games. Maybe you can relate. Things are different now.

According to the IRS, if your business is a sole proprietorship (or a partnership in which both partners are the child’s parents), wages paid to a child under 18 aren’t subject to Social Security or Medicare taxes, and wages under 21 aren’t subject to Federal Unemployment Tax Act (FUTA) taxes. If you pay them for legitimate work, such as organizing files, setting up computer systems, doing research, or helping with social media, and carefully document the hours and pay, you can deduct those wages as a business expense. [1]

Turning Earnings Into Long-Term Wealth

Here’s where it gets exciting: if your child has earned income, they have the option to contribute to a custodial Roth IRA—up to $7,000 in 2025 or the amount they earned, whichever is less. That money could grow tax-free for 40 or 50 years. Imagine the impact of starting their retirement savings before they even finish high school. You’ll also be in the position to explore strategies like rolling over unused 529 plan funds (up to $35,000, with certain rules) into a Roth IRA when they’re older.

More Than Money

This isn’t about spoiling your kids. It’s about instilling good financial habits early and ensuring that the wealth you’ve worked hard to build continues to serve your family for generations.

Not every advisor is fluent in these strategies, and even fewer can help you integrate them into a comprehensive plan that aligns with your business, tax, and estate goals. Be sure to work with someone who understands the nuances of business ownership and alternative wealth-building strategies, because that’s how you turn opportunity into legacy while also giving your bottom line a boost.

Sources:
1. https://www.irs.gov/businesses/small-businesses-self-employed/family-employees

Sean Gerlin, CFP®, CPWA®, ChFC®, CLU®, is the Founder and Principal of Envision Wealth Planners, a fee-only financial advisory firm based in the greater Orlando area. Sean specializes in helping high-income families, business owners, and commercial real estate executives align their wealth with their values through a comprehensive Financial Life Planning approach. Learn more about them at envisionplanners.com. 

This material has been prepared in collaboration with Crystal Marketing Solutions, LLC, and has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.

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