Nickel: Kid Allowance App + Debit Card + Set Your Own Custom Interest Rate

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If you’re reading this, you obviously value financial knowledge and creating a secure life for you and your family. If you have kids, then you want them to develop the same skills. The NYT bestseller book The Opposite of Spoiled explored the many modern ways to teach kids about money. One recommendation for allowances is to split it up into three jars: savings, giving, and spending.

For that saving jar, an additional hack would be to pay your kids interest on their savings. For example, you could pay a monthly interest rate of 10%, which is huge in the adult world, but for a kid you need it to be large enough to be “felt” and hopefully teach them the following concepts:

  • Regular, automatic savings. Let’s say you give them $10 a week that is automatically saved. (They don’t manually move money over every week, it just happens like a 401k plan.) Even with no interest, two and half months later, they’ll have a hundred bucks!
  • Passive income. Now you could introduce the concept of paying interest. When they see their $100 pay $10 in interest at the end of the month, perhaps they will start to understand the power of passive income. “I could keep the $100 in there and still get to spend $10 every month forever!”
  • Compound interest. Now show them how they can get interest on their interest. If they start with $100, don’t take any money out, don’t save a penny more, at 10% monthly interest they will still have $314 after 12 months of compounding.
  • Compound interest + regular savings! If they start with $100, don’t take any money out, keep saving another $10 a week, at 10% monthly interest they will have $549 after a 12 months of compounding. This is starting to become serious money!
  • Passive income revisited. A year later, that passive income isn’t $10 a month anymore, it has become $55 a month! This would be a good time to tell you that parents pay the interest, so if you have a little Warren Buffett at home you should set a cap on interest payments upfront. 😉

There are a growing number of “allowance apps” to cater to this market, but Nickel (iOS only, Android “not yet”) is one of the first services that I’ve seen implement this custom interest rate feature. Designed for kids age 8 and up, Nickel offers a reloadable debit card and a smartphone app for you and the kid. The parent can view all transactions and control things like allowance amount, one-time transfers, and interest rates.

Much like adult prepaid cards with 5% APY savings accounts, there are two buckets of money: the “Card” account which is available to spend via Mastercard debit, and “Pocket” account which earns interest. Here’s a 1-minute video explainer and some screenshots of the interest rate feature:

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Finally, apps are cool, but let’s not forget the core values and character traits that lead to good behavior in general.

Someone Is Doing The Thing That You Decided Couldn’t Be Done

bbootWe are currently planning a 4-week European trip with our young children (age 1 and 3). The most common reactions are “Cool. Wait, you’re not bringing the kids, are you?” followed by “You’re nuts.” At first, we didn’t think it could be done either. It does take a lot of additional planning for car seats, cribs, kid-friendly itineraries, and so on.

While doing some research at a site called My Little Nomads, the author shared a quote by Seth Godin:

One of the under-reported stories of the internet is this: it constantly reports on what’s possible. Somewhere in the world, someone is doing something that you decided couldn’t be done. By calling your bluff and by pointing out the possibilities, this reporting of possibility changes everything.

You can view this as a horrible burden, one that raises the bar and eliminates any sinecure of comfort and hiding you can find, or you can embrace it as a chance to stretch.

That is a great quote that encapsulates why I love the internet. If you want to start your own niche business, pull off home-cooked weeknight meals, take your house entirely off-grid, semi-retire at age 40, or just take your tiny kids on an adventure – someone out there has probably already done it. You may even find an entire online community ready to help you reach your goal. There will be doubters, but all you need to know is that it’s possible.

Teaching Kids About Money: Bi-Rite Market Owners, Father and Son

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This Narratively “longread” about the history behind the hip Bi-Rite Market in San Francisco’s Mission District was an intriguing father-son story.

Part of it involved entrepreneurial parents trying to pass on important financial skills to their children, like this excerpt involving the father Ned:

Every day, a group of homeless would line up outside the store, and Ned would feed them a sandwich and soda. No questions asked; no thank you needed. He was generous to his kids, too, but not without strategy or purpose. He’d pay them twenty dollars a day for their work at the market, a decent wage in the ’70s. If the kids agreed to save their earnings in the bank, Ned would double it. If they didn’t, that was all they got. Over the years, each child managed to save $20,000, thanks to Ned’s matching practice. “That’s how I encourage them to work and save money,” Ned says. “Sometimes you have to do your tricky things if you love your children.”

I found it amusing that when his son Sam decided to start his own small business, instead of worrying about him going broke, that actually made him feel more at ease.

“He was excited that I was going to be in control of my own destiny, even though it was a restaurant,” says Sam. “Pursuing entrepreneurship was following a path that he knew, that he was comfortable with.”

I would think most parents would rather their kid go the “safe” route of relying on a professional degree like lawyer, doctor, finance, or engineer.

I enjoy collecting anecdotes like this. Here are past related posts:

How To Start Your Very First Business by Warren Buffett’s Secret Millionaires Club (Book Review)

startbiz_180While I don’t expect my kids to be the next Warren Buffett, I do plan on encouraging them to start and run their own tiny businesses someday. I’ve previously shared an online cartoon series called Secret Millionaires Club that teaches financial literacy and is supported by Warren Buffett. As an extension of that effort, there is a new book called How to Start Your Very First Business.

I accepted a free review copy of the book and here are my notes.

I think the best question to start with is – why do you want a kid to start their own business? The primary goal is not to make them rich. It’s about helping them to be successful at life in general. Both Warren Buffett and Charlie Munger think this way. Consider the many character traits and interpersonal skills involved:

  • Reliability
  • Honesty
  • Social skills
  • Attention to detail
  • Patience and tolerance
  • Failure and perseverance

The book does a good job of covering the different aspects of starting a business. For example, there are worksheets for figuring out your per-unit profit and your equivalent hourly wage. One area that has light coverage is business licenses, taxes, and legal permits (understandably I suppose). Here is the table of contents, nabbed from its Amazon page.

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Lots of good examples and ideas. There are several case studies of other young entrepreneurs along with additional business ideas in the book. A few examples:

  • Hart Mann started Man Cans, candles that smell like sawdust, bacon, or coffee. (Started at age 13.)
  • Jake and Lachlan Johnson invented and sell customizable bow-ties at Beaux Up. (Started at age 14.)
  • Greyson Maclean sells reusable stickers and cling decals for Lego products at BrickStix.com. (Started at age 9.)

Lots of Warren Buffett quotes and quips. Oldies-but-goodies include:

Protect your reputation. It takes years to build a reputation but only minutes to ruin it.

Decide early in life to make your money by selling things that you really believe are good for the customers.

The book understands that it can’t teach you everything. They really have to go out and do it themselves. There are so many intangibles in real business, this book is just a starting point. Hopefully the book can give them a base, and parents can support their efforts (but also let them fail, and hopefully get back up).

Overall impression. This book would make a great gift for the motivated tween or teenager. I enjoyed the mix of approachable advice, Buffett quotes, and real-world examples of young business-owners. The book says it is intended for ages 9 and up, but you’ll have to decide yourself if the recipient is ready. It won’t be much use if they aren’t ready to take action.

If you’re a parent, you’ll have to look up any legal requirements in your area. The book comes with a free Square reader for accepting credit cards, but the parent will have to sign up for an account first.

Willing.com Review: Free, Legal Online Will Software

I must admit that I procrastinated on setting up a will, much like many others. Ideally, an experienced, skilled estate lawyer would create something customized to your situation. But it is not always clear how to find such a person, or know what a fair cost would be. Maybe we just don’t like the idea of thinking about death.

If you don’t create a will, your state already has a default plan in place (look up the intestacy laws in your state) and it may not be what you would have chosen. Do you want a stranger appointing the guardian of your children? I tried to think of it as a gift to my family. A reader recently told me about Willing.com, a new website that promises a free, legal will in about 10 minutes. Is such a service a good idea?

Here’s what The Consumerist (owned by Consumer Reports) had to say about other DIY will-making software:

Our wallet-watching cousins at the Consumer Reports Money Adviser newsletter took a look at three DIY options for will-making — LegalZoom, Rocket Lawyer and Quicken WillMaker Plus — and found that while all three are better than not having a will, none of them is likely to meet the needs of anything more than the most basic of estates.

I’d never heard of Willing before, but the other software costs $35 and up, so I took it for a little spin and took a bunch of screenshots (click to enlarge).

Overall, the interface was very pleasant and modern and mobile-friendly.

First, they will ask some basic information about you and your family. Names, genders, zip codes, and birthdates, but not Social Security Numbers. I suppose they aren’t required legally? At least it’s one less source of identity theft to worry about.

Next, they will ask you how you want to handle your property…

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.. and final arrangements.

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Who do you want to carry out your wishes?

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When you’re done with the questionnaire, your will is created and customized to your state.

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You can then print or download your complete will as a PDF, and also create an optional living will.

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At no point do you see any advertisements nor do they ask for any payment information. The last screenshot does provide a hint as to the future revenue model for Willing – perhaps they will set up a way for you to prepay your funeral expenses (relieving your family of some stress and money) and get a little cut of that. That sounds reasonable to me if they are providing the will for free. Of course, if you live another 50 years, will you even remember shelling out that money?

I am not a lawyer and thus can’t vouch for the accuracy or quality of the will contents. As the Consumerist article states, one thing to worry about is outdated information if their software isn’t updated regularly. The final instructions tell you to sign the will along with two valid witnesses and that a notary is not required for the will to be legally binding.

The final document produced was only three pages long, although my theoretical situation was pretty simple. As I read through it, I started to see how such software would eventually become free. Indeed, while researching this post, I found several other “free will makers”, although Willing.com had the best user interface and had the least amount of annoying ads.

It may not be optimal, but at least going through the Q&A process will make you aware of the various issues you need to think about. Who will take care of your kids if your spouse dies? Who is your backup heir? Your backup estate executor? Maybe just starting the process of putting your wishes down in writing is a good thing. Otherwise, I can see someone with a simple situation using this software, but don’t know if I could recommend such a service to my friends. If I really cared about how my estate was handled (i.e. I had a significant net worth and/or dependents), I would recommend hiring a lawyer instead. The question then becomes – Is there a better way to find a good estate lawyer than relying on word-of-mouth?

My One-Page Financial Plan: Why Is Money Important To Me?

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onepage0I’ve already shared two nuggets from the book The One-Page Financial Plan by Carl Richards – the importance of getting started and the true value of a human advisor. But what about the title itself?

Before even reading the book, I was impatient and tried to make a one-page financial plan but it didn’t sound right. Even after reading it all the way through, I got a bit lost as besides “one-page plans”, it also tried to cover other big topics like budgeting, investing, and insurance. It took a few re-reads before things finally settled down in my mind. Here are the parts that helped the most:

Your one-page plan simply represents the three to four things that are the most important to you: some action items that need to get done along with a reminder of why you’re doing them.

Having done this with hundreds of my clients, I’ve found no more efficient strategy for solving the problem of how to handle our finances than asking “Why is money important to you?” […] If you’re doing this with a spouse, it’s important that each partner answer the question separately.

The reason I ask my clients this question is because it helps us understand their values. Often, the process of asking “Why?”—“Why is money important to me?” or “Why have I been so anxious about money lately?” or “Just why do I work so hard anyway?”—uncovers deep desires and fears that we are often too busy or too scared to think about. While the process can be uncomfortable, recognizing what really matters to you is the first step toward making financial decisions that are in sync with your values.

Recently, the author shared his own plan on his website – What Does a One-Page Plan Look Like?:

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There are many reasons why my plan (at the top of this post) will be different from the author’s and yours. Our current situation is different, our priorities will be different, our goals will be different.

Why is money important to me?

  1. I greatly value security, sometimes so much that it is irrational. I don’t want to have to rely on anyone else for money or favors. We cut back on work hours to spend more time with kids, but we still want to make more than we spend. It’s not time to touch that nest egg yet!
  2. I greatly value spending time with my family, both on a day-to-day basis and for extended vacations in new and strange places. I have to work hard to avoid getting into a rut where the days and weeks all start melding together. Even if it means lugging multiple car seats and strollers everywhere, I still want to stay curious, make some mistakes, have some adventures.
  3. I want to someday shift my activities such that they more directly give back to my community or some other greater good. I don’t like the idea of just writing checks though, so I need to find a more active and satisfying role. If I could make some money while doing this, that would be great, but otherwise I need to put enough aside that my investments will support me.

The overall point of both this exercise and the book is that improving your financial life doesn’t have to be done perfectly. Just by getting started and putting down your best guess down on paper, you’ll already be better than most. If you see something wrong when comparing your values and your actual behavior, then make some changes. Having done them, I recommend both doing this exercise and reading the book. If your library participates with Overdrive.com, it is available to borrow as a Kindle eBook.

The Opposite of Spoiled Book Review: Kids and Money

spoiled160Here’s my one-sentence review of the book The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money by Ron Lieber. If you have kids and feel it is important to teach them about money, then you need to read this book. Why? Simply put, money is still taboo and I don’t know of any other well-organized discussion of the topic. Your school won’t probably won’t teach them. Consider the point of view of teachers addressing why some families make less money while and others make significantly more:

If teachers answer them by talking about government and taxes and policy, the responses can start to sound political (and boring). If they respond by addressing individual behavior and ambition, the answers start to seem like moral judgments.

Other parents feel sensitive about it themselves. This is what Lieber himself was told when he was asked to talk about money at a private school:

[…] could I please keep in mind that some of the families with more money than average were starting to feel demonized and those with less were feeling like their noses were being rubbed in everyone else’s affluence?

I know there are textbooks and stuff related to “financial literacy education” out there, but studies have shown that financial literacy classes don’t work.

The book is basically an attempt to compile the best practices for parents in the areas of allowances, chore-setting, cell phones, clothing, cars, part-time jobs, and paying for college, along with teaching the skills of saving, investing, and charitable giving. I may not necessarily agree with every idea in the book, but at least it allows provides good exploration of these topics and may uncover small things you might not have considered.

As you may have guessed from the book cover image, one recommendation for giving allowances is to split it up into three jars: savings, giving, and spending. As I wrote about in my teaching money skills without money post, these three jars each have a special purpose:

  • forced saving jar = patience, delayed gratification
  • forced giving jar = generosity and empathy, responsibility to help community and others
  • forced spending jar = trade-offs and thrift

Throughout the book, I definitely felt that the content was aimed at relatively wealthy parents and thus their relatively wealthy kids. Lieber recognizes this:

We may not be in the same category of wealth, but many of us have enough to give our kids everything they need and much of what they want. And even if we have less than many people we know in our communities, we have more than most in our country and our world. We know this, but our kids probably don’t quite yet. So how do we make them aware of just how good they have it, without preaching to them or making them pity others who have less? And how do we remove them from their life of relative ease every so often and expose them to people and places that are not like the ones in their everyday lives?

I guess kids just don’t do much these days besides try to get into college and travel on sports teams:

The Stanford expert on adolescence, William Damon, writes matter-of-factly of the many children “who have privileges that were once reserved for royalty.” […] So start the job in the home, where we can help our kids act on […] a drive for competence. “They avidly seek real responsibility and are gratified when adults give it to them,” he wrote in Greater Expectations, his book about how far our expectations for our children have sunk in recent decades. Indeed, in many urban and suburban families, the chores that we assign them don’t add up to much.

Getting our own children to do more, and earlier, in the way of preparing, cooking, and cleaning up after meals isn’t easy. It takes practice and persistence, in the same way we may need to hover over them during the first months of music lessons as they whine and complain when things don’t come out quite right. Still, failure should not be an option. Every child is capable of contributing to meals in a significant way, and we shouldn’t need to pay them to set the table, boil the pasta, or clean it up. It’s not as if we lack leverage: We control dessert, first and foremost. But playdates, screen time, and car privileges are all tools we can use if our kids need more than a gentle nudge to finish their regular work around the house and in the kitchen.

I’m making the case for a broad-based “Lands’ End Line.” If we adopt it, that means we’d pay whatever Lands’ End (my definition of a suitably mid-priced merchant that sells quality clothing) would charge for any clothing needs, even if an item comes from some other designer or shop. Anything with a price to the right of the Lands’ End Line would be a want. And if our daughter craved that item, she could pay, out of her Spend or Save containers, the difference between its price and the price of a similar item at Lands’ End.

Yikes, I think Land’s End stuff is pretty darn nice. That would mean my allowance-receiving kid is going to use her extra money to buy North Face or Patagonia stuff. We’ve been trying to buy most of our clothes second-hand up until now… I wonder how long that will last.

In any case, I liked the book and will refer back to it for various ways to financially educate my kids. Teaching them good core value and character traits are more important than 401k matches, Roth IRA contribution limits, or finding the lowest mortgage rate. I really hope they can learn that money isn’t everything:

If you want to feel rich, just count all the gifts you have that money can’t buy.

But money and stuff aren’t the only ways to define rich. Ask kids if they have any other ideas for what the word means to them, or try some prompts if they’re not sure. Perfect health? Living grandparents? Tons of cousins? Friends within walking distance? An amazing park nearby? Teachers and administrators who care deeply about helping the kids in their school? A god that they believe in?

Finally, my favorite quote from the book:

There’s no shame in having more or having less, as long as you’re grateful for what you have, share it generously with others, and spend it wisely on the things that make you happiest. It’s true for our kids, but it’s true for us, too.

Disclosures: I borrowed this book for free from the library in Kindle format. I will probably buy a physical copy to keep in the future. If you buy a copy through my Amazon link, I will earn a small commission.

Teaching Money Management Skills… Without Using Money

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spoiled160In the book The Opposite of Spoiled by Ron Lieber, there are a number of tips and tricks presented to help teach your kids to be good with money:

The foundation of the book is a detailed blueprint for the most successful ways to handle the basics: the tooth fairy, allowance, chores, charity, saving, birthdays, holidays, cell phones, checking accounts, clothing, cars, part-time jobs, and college.

As I read through them, most of them were never found in my own childhood. I was never given a wad of money to buy my own school clothes. I didn’t have a fancy save/spend/give jar system. I had chores, but was never paid for them. There was no forced or guided philanthropy. My parents didn’t pay me interest on my savings. When confronted with the fact that all my friends had allowances, my parents eventually relented and gave me… a dollar a week. This was sometime in high school.

I’m not saying that all these clever little schemes don’t help to create financial skills. I plan to use some of them myself. But we should also focus on the core values and character traits that lead to good behavior in general. Indeed, this is also acknowledged in the book:

Finally, I want to help all of you recognize that every conversation about money is also about values. Allowance is also about patience. Giving is about generosity. Work is about perseverance. Negotiating their wants and needs and the difference between the two has a lot to do with thrift and prudence.

So I took many of the topics in the book and tried to connect them with the corresponding character traits in the big graphic shown above.

There are many other ways to encourage your kids to learn traits like patience, perseverance, curiosity, or delayed gratification. Many have been part of cultures and/or religions for centuries. The first way kids learn is by watching their parents, so we must be good examples as well. (I know, can’t I just buy an app or something instead? I mean, thanks Mom and Dad!)

Montessori Chart of Age-Appropriate Chores For Kids

spoiled160I’m currently reading The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money by Ron Lieber. So far, it covers a lot of topics about money and kids that even us adults don’t like to talk about in public. For example, kids and chores. Do you pay them? Should they be expected? What tasks should they handle? As a new parent, I didn’t really think about how controversial this could be.

Every couple of months, someone sends me a link to a particular list of appropriate chores for children of different ages. The chart originates with the Montessori school movement, where children use tools at younger ages than most others do and choose activities that the teachers refer to as work. The chart suggests that 2- and 3-year-olds can carry firewood, that 6- and 7-year-olds should empty the dishwasher, and that 12-year-olds ought to do the grocery shopping. Invariably, the sender includes a note with some version of the general message: If only!

I found this version from the Maria Montessori Facebook page with over a million shares:

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For the most part, I would agree a the average kid can do these things at those ages. I really have no idea what the average kid does for chores nowadays:

…we can help our kids act on what Stanford psychologist William Damon describes as a drive for competence. “They avidly seek real responsibility and are gratified when adults give it to them,” he wrote in Greater Expectations, his book about how far our expectations for our children have sunk in recent decades. Indeed, in many urban and suburban families, the chores that we assign them don’t add up to much.

I hope to keep my expectations high of my own little ones, but I won’t go around bragging that “my kids will do that!” just yet. 😉 It sounds like it is more work to get them to do the chores than to just do them myself. But then again, isn’t it always harder to be a good parent than a bad one?

Teaching Kids to be Entrepreneurs: Jack’s Cosmic Hot Dogs

cosmicHere’s a follow-up post to The Best Advice For A Teenager Looking For a Job. One of the podcasts I regularly listen to is the Alton Browncast (of “Good Eats” fame). Many topics are food-related but often it boils down to him talking with really interesting people. In one of his earlier episodes, he did an interview with Jack Hurley, who is the owner of Jack’s Cosmic Dogs near Charleston, South Carolina.

Jack Hurley has started 6 restaurants and a few other businesses. Early in the interview, he discusses the creation of his popular, retro hot dog stand. It turns out, Jack wanted to start a simple business so that he could give his kids a job and teach them how to run a restaurant. His two sons were a freshman and sophomores in high school at the time. Here’s my transcript of that part of the podcast:

…We had to make it simple for high school kids to do… I told my sons, now watch this, your mom and I are going to create this place in one month, we’re going to paint it, do the logo, do the recipes, in one month. I want you to understand, that if at some point in your life you are tired of working for The Man, that you have this creative gene in you. We’re going to do this so fast it’s going to shock you.

Obviously not every parent will have the means or ability to do this, but I thought it was a pretty cool idea (and their hot dogs look yummy). From what I can tell, Cosmic Dogs has been around now for over 10 years, so I wonder if his sons indeed took to the entrepreneurial path?

The Best Advice For A Teenager Looking For a Job

mistakesI really enjoyed this article by James Altucher called “The Best Advice Ever To A Teenage Daughter Who Needs To Make Money“. His kid is considering taking an $8 an hour job, presumably in either the food or retail industry. Why not? The first three items on my complete job history were certainly along those lines, along with nearly everyone else including these comedians. But he has some alternative advice, here is just a snippet:

I said to her, instead of that: why don’t you go to Lynda.com or CodeAcademy.com and learn basic WordPress skills. You can make blogs for stores.

It would take you ONE DAY to learn the basics.

Then go from door to door to every store in town.

Say for $1000, plus $50 / month maintenance, you’ll make their blog or basic website for them and help them upkeep it. If they require a “shopping cart” then charge them $2500.

She frowned a little and said, “They will say No. They don’t need it.”

She doesn’t want anyone to say No to her. I can relate to that. I don’t like it when people say No to me either.

I said, “Ok, we have about 40 stores on this street. Let’s say only 2 say yes. That’s $2000. It will take you ten hours to do the work.

That’s $200 an hour instead of $8 an hour.

Now, a lot of people seem to think learning coding = rich kid these days. But I think his point is more about getting out there and “making something out of nothing”. Right now, a WordPress blog is probably the easiest way to do that (ahem). Also, it’s about just getting out there, trying some stuff, and seeing what works and what doesn’t. If you start a self-employed business, you will pick up most of the subsequent skills he talks about – accepting rejection, dealing with failure, salesmanship, communication, customer service, creativity, competitiveness.

If either of my daughters has that independent wrinkle in her brain like her old man does, I’d like to nurture it.

Here are some other money-making options that I’ve though of, although the environment may be different when they finally become teenagers.

  • Buy things at garage sales or local stores and then resell them on eBay or Amazon Marketplace.
  • Make your own crafts and sell on Etsy.
  • Start a stand at the local farmer’s market or weekend flea market.
  • Design or invent something and figure out how to get a factory in China to build it for you.
  • Start a YouTube channel (learn video production and editing skills).

On the other hand, I actually think a menial $8 an hour job is still working taking on, if only to experience firsthand how tough it is.

Tax-Free 529 Savings Plans For Disabled Children and Young Adults

This won’t apply to everyone, but it could be significant if it does. I didn’t know about this until recently.

The Achieving a Better Life Experience (ABLE) Act used the structure of 529 college savings plans to create similar tax-sheltered accounts for the benefit of caring for disabled children and young adults. In addition to healthcare, qualified expenses would include education, housing, transportation, and employment support. The legislation has passed, but it doesn’t look like any states have actually created plans that you can open yet. More info here.