Money is often cited as the #1 reason people get divorced, and it may be the #1 reason that child actors and their parents “break up” as well. Money—miscommunications around it, mismanagement of it, and misunderstanding where it all goes has led to tragic results in the lives of many young actors.
Not Family Money
The first thing to get straight is what the law makes clear: in the state of California, 100% of every dollar a child actor makes belongs legally to THEM—and them alone. It is not “family money.” Of course in California 15% of each paycheck also goes straight into a Coogan Account (a blocked trust account only available to tap after the actor turns 18). But that money is ultimately theirs too.
This information can come as a surprise to the many families who come to California each year for pilot season and beyond, who are used to laws in other states that are much grayer. In every other state of the country, a child actor’s money can be considered “family money.” While the fairness of this is entirely debatable, it is legal for a family to consider money a child earns acting/singing/dancing/modeling etc. as available to do with as they see fit.
Communication is Key
After understanding what the law says, it’s important for parents to have a conversation with their young actors about what is fair and what they can expect. Most child actors, unless they are told otherwise, will expect that the money they earn is theirs to keep and that it will be available to them when they come of age. They can be in for a terrible shock if this is never discussed. Or if they they ask for the money they believe is waiting for them at 18 and discover that their parents have spent it all!
This sense of betrayal can destroy a relationship between a child and their parents. This is exactly what happened to Jackie Coogan, one of the first child stars, and is why the Coogan law was passed. Unfortunately for child actors, there are only laws like the Coogan law in FOUR states in the country: California, New York, New Mexico, and Louisiana. Kids in other states have no legal protection at all for their earnings—even the small 15% that a Coogan account shelters.
What is reasonable?
On the other hand, there is no doubt that parents often spend a huge amount of time and money—often years, and many thousands of dollars—helping their young actor begin and build a career. Is it fair that they get no contribution back from their kids if and when money does show up? Probably not. Minimally, income from a child actor should help pay for the costs of that business (and being a child actor is a business). Common expenses include headshots, acting lessons, dance lessons, union dues, etc.
After that it becomes an area that is very individual for each family. If a parent gives up literally years of their earning potential to be an unpaid full time support for their kid’s career, it may be entirely reasonable to take a percentage of the income the child earns as a token repayment for some of that lost parental income.
Parents as commissioned managers
Many parents cut themselves in as managers and pay themselves a percentage of the child’s income for exactly this reason—it’s reasonable under the circumstances. But parents who think they will get rich off of their kids are either kidding themselves, or haven’t run the numbers.
The reason a professional manager can make a living is because they represent multiple clients. Taking 10% to 15% of the paycheck from a stable of clients can add up to a nice income. However, taking 15% of one actor’s income—even one who is a series regular on a show—will not yield enough money to support a family.
Where does the money go?
On top of this, child actors rarely end up with enough money after various commissions to support themselves, let alone an entire family. Standard commissions can include 10% to an agent, 10-15% for a manager, maybe 5% to a lawyer, and possibly 5% to a business manager. Then maybe 18% to 40% to TAXES. Yes, child actors who earn income have to pay taxes like the rest of us. And possibly another 15% funneled into a Coogan account. The idea that a family could live off a child actor’s income is basically a fantasy.
What parents must do, whatever state they live in and however much money their kid does or does not make as a performer, is manage that money responsibly. They also need to communicate with their kids (assuming the kids are old enough to have a basic conversation about money) about where it is going so there are no rifts in the relationship later. No amount of money is worth the tragedy of losing your relationship with your child.
A learning experience
Keep organized records and have regular conversations with your young actor as they are old enough to have them. Make sure they understand where their hard-earned money is going and why. Even smart, older kids may be focused on their gross income and not really understand the effects of commissions, expenses, and taxes, and the difference between gross and net income. Be sure to file and pay their taxes when they make enough money to need to pay them, so they (and you) don’t end up in trouble.
So many of the sad stories of estranged young actors and their parents are about parents either mismanaging their kid’s income, or deep disagreement regarding how that income should be divided. Don’t let that be your family’s story.
The hidden gift
If you can stay in communication as your child grows older and is able to understand more and more about the business side of their acting career, they are more likely to make responsible choices when they turn 18 and get access to their Coogan fund (if they have one), as well as legal control over their entire income. Of all the gifts you can give your young performer, a responsible approach to their finances may be one of the greatest.
My book, The Hollywood Parents Guide, available on Amazon contains everything I wish I’d known when Dove and I started this journey, and will save you untold amounts of time, money, and stress. Full of information you MUST know, it also features stories from parents of other kids who’ve made it!
Or book an hour consulting with me to come up with an individualized plan that takes your own unique needs into account. For about the cost of an hour with a professional acting coach, you can get your questions answered and a road map to help you move forward toward your dream.
If your young actor is 12 or older, they will enjoy reading my second book, Young Hollywood Actors, which shares inspirational stories and advice from some of their favorite performers.
Invest a little in your kid’s future today.
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