While it’s important for children to understand how taxes work, it’s also important to understand that family finances are a personal matter. When deciding to teach your kids about taxes, the choice of how much information you share with them is up to you.
Like any other important conversation, prepare ahead of time and make a list of possible questions your child may ask, such as:
- If you are paid x%, why do you only bring y home?
- If we have b left over, why can’t we spend it?
- Where does the tax money go?
- Why is your tax percentage so high/low?
- How do you pay taxes?
- My friend’s dad pays c, does that mean they…
This is a personal decision for each family, and the goal of this discussion is to prepare your child for adulthood, and show them what to expect once they are a part of the working world.
Another important part of understanding taxes is understanding the purpose of taxes. What do taxes do? Why do we pay taxes? Why do some people pay more taxes than others? These are all questions that will lead your child to having a better understanding of how our social system works, and this conversation can be tailored to all ages.
Tax time presents some teachable moments, but it’s up to you as a parent to do the teaching, as understanding taxes is crucial for your child’s success later on. Good luck with your discussion and never be afraid to say you don’t know the answer to their question. Discovering the answer together could be a great learning and bonding experience for both of you!