As the April 15 deadline for filing taxes approaches, chances are your kids have questions about taxes. Teaching kids about taxes is just as important as conversations about money so they become financially literate. However, understanding what taxes are, who they benefit, and how they are paid often gets left out of the conversation.
For advice about teaching kids about taxes, I reached out to the advisors at VWG, a Hightower Company. Below you’ll find common questions kids ask, how to respond in a way that they’ll understand, and a fun game for elementary ages and younger that helps them understand taxes in a concrete and visual way.
Teaching Kids About Taxes in Age-Appropriate Ways
While taxes can often be intimidating and confusing to even adults, it is important that your child has a basic understanding to encourage financial literacy. Once you teach the basics of taxes, kids are more likely have a stronger understanding of taxes, how they will be taken out when they start their first job, and what they’re used for.
To help guide you in teaching kids about taxes, here are common questions each age group might have and how to answer them.
Teaching Preschool through Elementary Ages About Taxes
The youngest ages have questions like what taxes are, why you have to pay them, and where the money goes. Start by answering these basic questions and if they want to know more, educate them on the different types of taxes and when taxes are paid. End with a fun game that will help them understand the concept that taxes are a percentage that get taken out of each paycheck.
What are taxes?
Taxes are mandatory financial charges that individuals and businesses must pay to our local, state, and federal governments to help cover the costs of governmental services, benefits, goods, and services.
Where do my taxes go?
Your taxes go toward many public services such as schools, road repairs, parks, and our various government budgets. Taxes enable Americans to collectively contribute to the resources that we benefit from.
How many types of taxes are there?
There are several types of taxes that we must pay, including but not limited to, income tax, sales tax, payroll tax, property tax, estate tax, gift tax, and travel tax. Let kids know the taxes they will be charged most often in their young lives are payroll and sales taxes.
When are taxes paid?
The frequency of when payment is due for taxes depends on the type of tax. For example, sales tax is paid immediately when you purchase something from a store. Use an example that kids will relate to like a $1.99 bag of chips. When you pick up a $1.99 bag of chips, give it to the cashier, and the cashier says your total is $2.13, that means you paid 14 cents in sales tax for the bag of chips.
Income tax is a bit different. Income tax is tax for the income made throughout the entire tax year (between January 1st and December 31st of that calendar year). The deadline for payment for those taxes typically is April 15th each year, unless you are granted an extension or are self-employed.
Candy Game to Learn About Taxes
This 4 step game helps younger ages visualize percentage of taxes taken out of a paycheck by using a bag of candy.
- Go to the store and purchase a large bag of candy.
- Spread all the candy on the table.
- Remove a little less than a quarter of the candy off the table. This simulates the roughly 14.5% of tax that single individuals pay in the U.S. It will show your child that even though initially they received a larger amount of candy, a certain chunk will be removed so they can “pay” their fair share as a working citizen.
- Check in with your child to make sure they understand that their earnings and the goods they purchase will be taxed.
Other post I’ve written and resources to teach elementary ages about taxes:
- The Best Free Resources for Teaching Kids Financial Literacy
- Outschool online financial Literacy classes
Teaching Middle Schoolers and Older Kids About Taxes
As kids get older and start to work, they can see the dollar amount of taxes taken out of every paycheck. Here are some questions working middle and high school students may have, as well as college students, and how to help them better understand taxes as working individuals.
How can I see how much tax is taken out of my paycheck?
Every time you get paid, you receive a pay stub. This your receipt of how much money you made before taxes were taken out (gross income) and how much money you will actually receive in your bank account after taxes have been taken out (net income). Within that pay stub, you will see a breakdown including how much federal and state income tax was taken out for the pay period along with Social Security and Medicare.
Is the amount of taxes taken out the same for each pay period?
No, the money you pay in taxes varies depending on how much you earn during the pay period. So, for example, if for the first two weeks of the month, you worked 10 hours and the last two weeks of the month you worked 20 hours, you will pay more for the latter half of the month since you worked more and therefore made more income.
Are taxes taken out of my tips?
Yes, if you have a tipped job such as a waitress or barista you must report your tip income.
Do college students have to pay taxes if they work part-time?
If you make less than $14,600 in 2024 and are a single filer, you may not be required to file. However, they may decide that they want to file, especially if they are making student loan payments while in school or paying for their own education out of pocket. If they pay out of pocket, they can file a 1098-T and potentially receive a refund.
Other blog posts I’ve written to teach tweens and teens about taxes:
Huge thanks to VWG, a Hightower Company, for their helpful insights for this post. No compensation was received. All opinions are my own.
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