Parenting With A Purpose: Teaching Taxes

Who agrees that taxes should be a subject taught at school? But, where do you start? And what do you teach? And at what age? Parenting psychologist, and board-certified behavior analyst, Reena B. Patel shares ways we can start implementing tax prep and speaking about importance of money to children.

Tax season is here and it’s a great opportunity to teach kids some lessons about taxes and financial literacy.  Why? It helps convey a sense of shared responsibility for the essential public goods that their taxes will someday support. Reena joined us for a live interview to elaborate on all these tips. Be sure to check that out along with the outlined tips below.

Let’s break this down by what is developmentally appropriate per age group. 

  • Your child must have the cognitive skills to understand and learn about money.
  • Children are concrete learners and develop abstract thinking abilities into their later school age years. It is important to teach what experts call financial literacy, but as parents you want to make sure your child accepts behaviors that show they are ready to learn.
  • The earlier your child develops good habits around money, the better they will be able to handle their finances when they are adults.
  • Social Security, property taxes and so forth, may not be as well understood. Consider providing a basic overview of each. For example, you can prepare kids for the realities of earning a paycheck by showing them yours. Highlight what you pay toward Social Security, Medicare, federal, state and local taxes, explaining the purpose of each gives them a sense of how it affects their family and the lifestyle choices they make.

Toddlers

  • Children model our behaviors, so it is important to set a good example. For example, mommy and daddy  use money to buy things, and coins and dollars have value and are used to exchange. Make sure to use visuals to help guide your conversation and keep it as simple as possible and geared to your child’s level of understanding. For example, use a toy or game they want. Let them see you do the purchase.

Ages 3-5

  • Children begin to develop one on one correspondence. They begin to count objects in front of them. This is a great time to use coins as objects to count too. Make sure to show them the differences too. The penny is different from a nickel. For example,
  • When talking about the exchange process, make sure they understand something has to be given up to get. This might be challenging so practice this with a toy cash register at home. Do role play and add value to the toys and books you might use when doing pretend store play.

Ages 6-10

  • Most people have to work to pay for everything they want to own or do. At This age children understand delayed reinforcement. For example, they can earn points or stickers during the week for making good choices or doing their chores in exchange for a reward or money at the end of the week. It takes determination and hard work to earn rewards. This will be the same for allowances. It takes hard work to earn money.
  • This is a great game to gift them with a piggy bank and learn to save money they earn. Introducing what a bank is. A league place to save money and take out what you need. What to do on a rainy day? An emergency fund. Get additional piggy banks and label them for spending, saving, and giving. Talk about saving for college.
  • Introduce the concept of giving and charities.
  • Great time to talk about privilege vs necessity too. Help your child identify where to spend and when.

Teen years 

  • This is where parents tend to ask children what they want to be when they grow up. You have a discussion about the importance of education and  finding a job that supports you. how much you take home. Explain taxes, Social Security, insurance premiums, and other deductions from your paycheck.
  • While your child doesn’t need a personal budget right now, it’s a good idea to learn how to set one. Include them in your budgeting, asking for input on financial decisions like meal planning for the grocery budget.
  • When your teen asks you they want the latest gadget. Don’t say we can’t afford that as a blanket statement. Go in, let ‘s see if this is a good buy and the right thing to do at this point. If you were to buy the latest iPhone what would we be trading off? Would we be able to use this money on a more needed item?
  • Personal accounts: While a checking account is all a teenager technically needs, it’s a good idea to open a savings account as well (if you haven’t done so already) so they can include deposits to both accounts in their budget and see firsthand the impact of compound interest.
  • Your teenager will need (want) more money and a weekly allowance won’t cut it. Great time to start a discussion on a part time job. The pro’s and con’s in terms of balancing this.

School-aged kids regularly interact with essential infrastructure paid by taxes. Use everyday examples: 

  • Point out parks, playgrounds, post offices, roads, bridges, hospitals, schools and other common government-financed services or goods they regularly see or engage with. Mention that when they get older, their taxes will help to pay for many of the places and services they use.
  • At the grocery store – try buying an item that costs a flat dollar amount. Then when at the register to check out, show your child that the actual price is greater than the labeled amount. Share that this extra money you pay on top of the labeled price goes to the government.
  • As kids get older you can start to differentiate the types of taxes you pay.
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