Rapid Fire Financial Shaylas

Q: What are your thoughts on using chesed hours to pay my babysitter as a way to save money when we go out on Saturday nights? Our friends suggested it, and it seemed like a good idea.

A: This does NOT seem like a good idea. It seems like you’re being cheap. If you are short on cash, there are plenty of smart ways to save money. Eat chicken instead of meat. Don’t order in. Take fewer trips. Cut back on streaming services. There are countless ways to reduce your spending without taking advantage of a system that was created for an entirely different purpose. Chesed hours are supposed to teach our children the value of helping others, particularly those who are less fortunate. Turning those hours into free or discounted babysitting so that a family can afford to go out on Saturday night completely misses the point. It also takes an opportunity away from someone who may genuinely need the help.

There is nothing wrong with paying a babysitter. In fact, if you can afford to go out, you should be willing to pay the person who is giving you their time and allowing you to enjoy your evening. If you cannot afford the babysitter, perhaps that is a sign that you cannot afford the night out.

We should be careful not to turn chesed into a coupon code. Teaching our children to give their time to help someone in need is a wonderful lesson. Teaching them to find creative ways to avoid paying for services they can afford is something else entirely.

Q: I’d like to gift some of my highly appreciated stock to my child so the gain is taxed in a lower bracket, and then my kid will pay me back in cash. Does this work?

A: Here’s a good rule of thumb: Any brilliant chiddush you come up with has probably been thought of already. As Shlomo HaMelech said, “There is nothing new under the sun.”

That being said, I do appreciate the creativity, but here’s why it likely won’t fly:

1. Assignment of income: If the sale is effectively already lined up, handing your kid the shares at the last minute doesn’t shift the gain. It’s still yours.

2. Substance over form: If the cash comes back to you, the IRS will see it for what it is, which is that you sold the stock and kept the proceeds. Calling it a “gift” doesn’t make it one.

3. Step transaction: The step-transaction doctrine is a legal rule that allows the courts and IRS to look at a series of related transactions as one transaction. If multiple steps are really part of the same overall plan, the IRS can combine them and determine the tax consequences based on what actually happened, rather than treating each step separately.

4. Completed gift: A real gift means giving up control with no strings attached. A wink-and-nod deal to return the money isn’t a gift.

5. Kiddie tax: If your child is under 19 (or under 24 and a full-time student), much of that gain may be taxed at your rate anyway.

6. The practical risk: Once it’s truly a gift, it’s your kid’s money. Don’t be shocked if it funds a new car, shana yud gimmel in Israel, or floor seats to the Knicks instead of your retirement. Bottom line: Gifting appreciated stock can make sense, but only if you actually mean to give it away and structure everything correctly.

Q: At this point, it seems like a no-brainer to buy Treasuries at 5%+. What am I missing?

A: As readers may have guessed, the questioner is missing a lot. While the yield is great relative to the last decade, you’re still locking in a fixed rate in a world where inflation, interest rates, and opportunity costs move around. If inflation averages 3-4% over the next several years, your real return is barely above zero. On the other hand, if rates rise further, the value of longer-term Treasuries can drop sharply, and you’re stuck unless you sell at a loss. (And yes, Treasuries fluctuate in price just like most assets.)

There’s also the question of what you’re giving up. Remember, friend, every decision has tradeoffs. This is true in life and investing. Stocks historically compound at much higher rates, and shifting too much into Treasuries can drag down long-term growth.

Liquidity matters too. If you need the money before maturity, your return depends entirely on market pricing at that moment.

B’kitzur: There is no question that Treasuries paying 5% are compelling. However, they’re not a one-size-fits-all solution. They’re a tool, not a strategy, and they work best as part of a broader plan rather than the whole plan. If any TikToker or buddy in shul is trying to convince you it’s a no-brainer, they are the ones with no brain!

Q: How do I divest my portfolio from AI if I believe it's going to destroy the world?

A: The short answer is that your thesis is flawed. Technological innovation is generally a good thing, and when harnessed properly, it improves productivity and enhances lives around the world. That said, I'll play along.

Given AI's widespread adoption, you cannot completely divest from it. To minimize your exposure, you would need to avoid the technology giants building AI models, the semiconductor companies designing AI chips, and the data center REITs housing the infrastructure that powers them. You would also need to reduce your exposure to broad market indexes, such as the S&P 500 and Nasdaq-100, which are heavily concentrated in mega-cap technology companies at the center of AI development. In their place, you could consider equal-weighted index funds or ETFs that specifically exclude the technology sector.

From there, you could allocate more capital to industries centered on physical operations, such as industrials, consumer staples, manufacturing, and traditional healthcare providers. Even then, the challenge is nearly impossible. You would need to scrutinize energy and utility companies to determine whether they supply power to AI-related infrastructure.

The bigger problem is that AI is rapidly becoming embedded in virtually every industry and business process. At some point, avoiding AI becomes less an investment decision and more a lifestyle choice. Unless you have no money invested anywhere, buy nothing, consume nothing, and live in a cave, you're supporting AI in some way. Sorry, but that's the world in which we live.