I’ve noticed a trend in the homeschooling community where the culture and learning approach naturally invites a headstart on wealth and retirement for young people. Whether you homeschool or not, these are some ideas to consider if they fit in with the flow of your child’s interests and learning style. Please note. I am a violinist, homeschool mom, neurodiversity advocate, a writer, an artist and a horse-lover. Nowhere in that list do you see tax expert. I’m sharing info, but certainly check in with your own CPA before acting on it.
Starting College Early through Dual Enrollment. One trend is that homeschoolers tend to start taking college classes early. Community college is one option. This is a way for students to access higher level learning under the umbrella of dual enrollment (DE). As DE, the course counts for both high school credit as well as college credit. In the state of California, community college is virtually free for the first two years. Many homeschooled high school students graduate high school with 24-60 college credit hours on their transcript. They need to check with the specific rules of the university they plan to enroll in after high school, but oftentimes if the courses are all taken before graduating from high school, the student is still able to enroll in a university with freshman status after graduation, so the college courses don’t stop them from applying for freshman merit scholarships. You can imagine how this early start opens the door to either completing college earlier or squeezing in a master’s degree in about the same amount of time. They can start to earn income and save for retirement at a higher level sooner than the average college graduate. Or, they may choose to spread college out over the four years and experience a more manageable course load, giving them margin for jobs or internships. Open an investment calculator and see what happens when you add two extra years to your income earning span and retirement savings, over 40 years.
Some thoughts to consider: Is your child ready for college classes? Can they keep up with deadlines? Are they comfortable calling and talking to the administration on the phone if they have a question about enrollment or are experiencing a tech issue? Can they self-advocate with a professor around a misunderstanding or the need for clarity or an accommodation? Is there a benefit to the classes? Some students prefer to start online or to find a cohort of homeschoolers to take classes together. Another way to dip your toe in without much risk is to look into Arizona State University’s Universal Learner program. It’s easy to sign up, and the clincher is that your child can decide whether to transcript the college class after they see their final grade. The downside- the ASU Universal Learner courses are all asynchronous, so if you are looking for live discussions this isn’t the right choice.
Early Entrepreneurship. Many homeschoolers take a project-based approach that is real-world and learner driven. For example, kids may prefer to publish a real book review online rather than simply to turn in a book report. Art class may lead to an Etsy shop selling homemade jewelry, crocheted baby caps or custom 3D print commissions. Their love for tennis leads to teaching a whole lineup of private lessons. The schedule flexibility of homeschoolers additionally makes this entrepreneurship doable. There is also a tendency to find internships at a young age. Further, with early income and a hands-on approach to learning, they may start investing in fractional shares of mutual funds through parent-created custodial accounts.
Early Retirement and College Savings. Once a child has any income, they can then open a custodial ROTH IRA. (How better to learn about real-life finance?!) Bonus: generally, a dependent child doesn’t owe federal income taxes on earned income that stays under $15,750. That is the magic number. Here is one more cool thing: Homeschoolers are often learning as a family (duh.) If your dependent child starts doing work for your business, their employment salary will lower your own tax burden. Your child can then turn around and fund their own college 529 account and custodial ROTH IRA through their earned wages, tax-free if under that $15,750 mark. So, in that situation, 1. the parent with the business experiences a little tax relief, 2. the dependent child earns tax-free income under $15,750, 3. they build their own college 529 and 4. they start their retirement so it has a gazillion years to grow with compound interest. A ROTH is tax-free yet again when they start making withdrawals in retirement. Beautiful!
Warmly,
Christina
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