How to Create a Passive Income Allowance For Your Child

Want to give your kid’s an allowance without spending your own money?

Well, that’s what we do.

We’ve designed Jordan’s investments to pay out passive income so that he has a monthly allowance.

It’s a great way to give your kids money that they technically are earning by themselves, and gradually teach them to take ownership of their own investing!

Wow, what a great home education right?!?

And you save money, because they are making their own allowance!

Step #1 Put Your Kids Money into 2 Different Accounts – 1 For Passive Income, 1 For College Education

I’ve put all our son’s gift money into his passive income account.

I only recently started saving for his college with the All Seasons Portfolio.

Step #2 Invest the Passive Income Account Money for Dividends and Bond Interest

Our son makes most of his money from dividends from preferred shares.

He also lent us money to pay down our business line of credit, which we pay him 5% interest monthly (instead of paying a bank 5.25% monthly).

We issue him a 1099-Int every year for the interest we pay him for his loan to our business.

Step #3 Pay Your Children Their Passive Income Monthly

We mail him checks automatically from our bank’s bill pay for the loan interest.

Recently he’s been old enough to go to the bank with me and learn how to cash his own checks.

I also teach him to put aside 10% to make him more money (re-invest), count his money and evaluate his spending decisions.

Conclusion

If you are spending your own money for your kid’s allowance, why not switch to a passive income allowance instead?

You can save money and create your own passive income allowance at the same time!

Who knows, your kids may be better at it than you!

In any case, you will both have a great home education.