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Teach Your Kids to be Financially Independent. Here's a Simple Way. 

One of the best things my wife and I ever did was put our kids on salary.  When our sons were 8 and 10 we put them on a monthly salary.  I had taught finance and investment seminars for a long time when I realized that there didn't seem to be anything out there for kids.  Then I found an amazing book.  The book was called "Debt Proof Your Kids," by Mary Hunt, and it spurred a lot of great ideas.  What if kids grew up understanding the value and use of money?  Go figure.  What a concept.

We modified Mary's ideas for our family, and it worked wonderfully.  I highly recommend the book.  Here's what we did.  From January 1 - June 30 we recorded every penny spent on the boys.  That included boy scout dues, clothes, shoes, stops by McDonalds, books, haircuts, theme parks, everything.  We averaged each boy's expenses, and on July 1st they went on salary.  Salaries ranged from $55-$70 a month at that time.  The mom and dad spigot was off. 

The deal was that we wouldn't buy them any clothes, shoes, books, pay dues, no sodas at the convenience store, no haircut money, no cash for theme parks, etc.  They would be responsible for every life expense.  If I chose to take the family out to dinner, I paid.  If they wanted to stop for a meal or soda, they paid.  If they needed a haircut, they paid.  If they wanted the new cool sneakers, they paid.  New video games, skate boards, trips to the movies or anything not initiated by me or my wife was at their expense.   We only paid for things my wife and I chose to do, and they paid for everything else. 

They were also required to save 10% and give 10% away.  So, they had to learn to live on 80% of their total salary.  In the first month, the youngest son was broke in about 2 days.  The first test of our plan came when my oldest son wanted to stop by a convenience store for a soda.  We did.  I bought one for my wife and one for myself.  My oldest son bought one, but the youngest son was busted.  No one offered the younger son a soda, and no one offered to share.  It was part of the deal.  That was probably one of the hardest things I've ever done. 

The second month, the youngest son made it to about week 2.  He did better, but he was still busted within 14 days.  Month three was much better.  He made it to the end of the month with  cash to spare.  Today, at 19 and 21, the boys are the bank.  Both boys are well on their way to financial independence.  The recession has had an unintended consequence for them. They've watched a lot of people lose everything they worked for because  they carried  excessive debt.  The boy's system has been to avoid unnecessary debt and save, and they're great at both.

Both boys have their own jobs now.  Mom and dad aren't supplying their salaries anymore, and they still save 10% and they still give 10% of their income away. The oldest son has developed into quite an entrepreneur and currently has his own business.  He's  also in college and the younger son is heading that way. 

We home-schooled the boys so scholarships are nearly non-existent.  This presents a new chapter in their financial lives.  Knowing that they will have some of their own money involved in schooling makes them a little more focused on what they will study.  Ironically, when their money is on the table they look at college with a whole different attitude.  They look at the value of what they receive in the classroom and not on college as one big party. 

Yes, we did get back involved in their financial lives once they were well established teens.  By then they were well on their way to a heathly financial life. 

If you have young children I would recommend that you pick up Mary's book and find out how to use it in your own life.  It has set my sons on the path to debt free living, and I love watching them use their minds to make things work rather than using Visa and MasterCard.  It's very exciting!  It's the one gift we gave to our kids that will last their entire lives.

Sometimes the differences between your employees and independent contractors seems negligible. Their work may be the same and theirsalaries almost indistinguishable, but regardless of whether you seesignificant differences among the people you pay, there is someone whodoes: the IRS.

With employees, companies are required to withhold and pay certain work-related taxes like income, Social Security, Medicare andunemployment. With independent contractors, they aren’t. In fact,companies are only responsible for filing one form (1099-MISC) forcontractors, and that's only if their salaries exceed $600. If a companymistakenly classifies an employee as an independent contractor, itfaces a load of paperwork and penalties and is generally held liable foremployment taxes and then some. So it's important to carefully
distinguish between your workers and your independent contractors.

Remember these qualifications of contractors so you can stay out of trouble with the IRS, an agency not generally known for its forgiveness:

1. They provide their own training.
   Independent contractors already have experience in their fields and require no specific training from employers.
2. They have control over the means of accomplishing their work.
   They can decide when, where and how the work is done. They don't have tofollow any instructions, and the only control the employer has over thework is the end result. Keep in mind that sometimes employees may seemto fit this description, but in this case the company still maintainsultimate control of the situation; with employees, an employer canchoose whether to exercise that control.
3. They have control over their salaries.
   Independent contractors decide how much their work is worth. If you are paying oncommission or by the job — or any other way other than on a fixed,periodic basis — you are probably dealing with independent contractors.
4. They can only be fired for a breach of contract.
   You cannot fire contractors because of general cutbacks or poor work ethicthe way you can fire employees. Generally, you can only fire them forbreaking contract stipulations.
5. They cannot terminate their relationships with employers at will.
   Conversely, independent contractors are usually contractually obliged to finish ajob, and they can be held liable for failure to do so.
6. They have their own tools.
   Independent contractors will always rent or use their own tools. However, so do manyemployees in certain trades, like painters and plumbers, so it's bestto consider the personal costs of the equipment. If these these toolsrequire a significant investment and expensive maintenance, you'reprobably working with an independent contractor.
7. They have to pay for all business and traveling costs.
   Like their tools, independent contractors are responsible for their businessand traveling costs, so if you don't foot this bill, you can reasonablyassume that you are not working with employees.
8. They run the chance of making a profit or incurring a loss.
   If the worker carries the risk rather than the employer, the worker is anindependent contractor. He or she has the responsibility of balancingequipment costs, delays, operating costs and the like with the salary
   being paid, hoping to come out on top.
9. Their services are available to the public, and they usually have multiple clients.
   If workers are offering their skills to anyone and everyone, they areprobably independent contractors. They are not bound to companies theway employees are. They strive to get as much business as possible, andthey do so by taking on as many clients as they can. Because of this, acontinued relationship with a single organization, though possible,usually does not exist.
10. Your company has no control over the contractor's assistants.
    If your company hires, pays or supervises any assistants helping a worker,that worker is an employee. Contractors take care of their ownassistants if they use or need them.
11. Oral and/or written reports are not required.
    Companies only exercise this control over employees. Independent contractors areunder no obligation to provide the company with any updates of theirprogress or anything except the end result the two parties agreed upon.
12. Their services are not completely integrated into your company.
    Chances are the work performed by an independent contractor will not becritical to your business as a whole. The more crucial their servicesare, the more likely workers are employees.

Knowing how to distinguish your employees from the independent contractors you hire allows you to maintain the upper hand in workerrelationships by knowing where your organization does and does not havecontrol. Plus, this knowledge can help you be completely prepared foryour employment-based taxes, so that not even those formidable IRSagents will be able to bring you down.

Hope This Helps