The Rise of Early Investment: How a Korean Startup is Pioneering a Novel Approach to Wealth Building for Children
American high-net-worth families have long utilized strategies to employ their children in family businesses, converting allowances into earned income and channeling it into retirement accounts. A key instrument enabling this is the ‘Custodial Roth IRA.’ Now, a Korean startup, Halfmore, is democratizing access to this strategy, sparking interest from global investors by structuring household chores as legitimate earned income eligible for Roth IRA contributions.
From Chores to Contributions: The Mechanics of Halfmore’s Approach
The Roth IRA, a tax-advantaged retirement account, allows contributions from minors with earned income. The annual contribution limit is $7,500 (as of 2026). Halfmore addresses a key hurdle: how do children legally earn that income? The company assists parents in establishing a business entity (using the parent’s EIN) and provides standardized employment contracts for household tasks like cleaning, and errands.
This service automates payroll and tax reporting, reducing the traditionally high barriers to entry – legal consultation fees (around $3,000) and ongoing payroll solution costs (approximately $600 annually). Halfmore currently operates in 14 US states, including California and Texas.
Who is Utilizing This Service? A Surprising Demographic
Contrary to expectations, Halfmore’s primary user base isn’t the ultra-wealthy. Data reveals that 59% of households utilizing the service have an annual income of $150,000 or less. The core demographic is parents in their 40s, with mothers initially showing interest, but fathers ultimately managing the accounts 70% of the time. Users frequently maximize their annual contributions, with half contributing the full $7,500 limit.
The average age of children with accounts is 8 years old, indicating a trend towards early financial education and asset building. Common “job” duties include chores like dishwashing, cleaning, and lawn care, with hourly rates aligning with state minimum wage laws, averaging $16-$17 per hour.
As the founder, Iju Hyun, explains, while a $10,000 annual “allowance” might seem substantial, it represents a significant long-term savings opportunity when viewed as a long-term investment. The core principle aligns with the original intent of the Roth IRA: to encourage early retirement planning and reduce societal burdens.
The Global Implications: A Model for Future Financial Policies?
While countries like South Korea offer tax-advantaged savings accounts like IRPs and ISAs, there’s a lack of similar options specifically designed for children and adolescents focused on long-term, compounded growth. South Korea likewise has strict regulations regarding gifts and asset transfers to minors, delaying significant investment until adulthood.
The success of Halfmore highlights the potential benefits of integrating early asset formation with long-term investment strategies. The US government is already exploring similar concepts, with the introduction of the “Trump Account” – a government-funded investment account for newborns, providing a $1,000 seed investment.
Pro Tip:
Consider the power of compounding. Starting early, even with minor contributions, can yield substantial returns over decades. The key is consistency and a long-term perspective.
FAQ
Q: What is a Roth IRA?
A: A Roth IRA is a tax-advantaged retirement account that allows contributions from earned income, with tax-free growth and withdrawals in retirement.
Q: What is Halfmore?
A: Halfmore is a startup that helps parents structure household chores as legitimate earned income for their children, enabling contributions to a Roth IRA.
Q: Is this legal?
A: Yes, as long as the child is performing actual work and is compensated at a fair wage, adhering to state and federal labor laws.
Q: What is the average age of children using this service?
A: The average age is 8 years old.
Did you know?
The concept of utilizing family businesses to provide earned income for children has been practiced by affluent families for decades, but Halfmore is making it accessible to a wider audience.
Iju Hyun suggests that a system focused on early entry into a tax-advantaged, compounding system, rather than short-term cash gifts, could be more effective in fostering financial security for future generations. This approach emphasizes the importance of early financial literacy and the power of long-term investment.
Learn more about financial planning for families here.
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