“Taxes” are confusing, even for adults. We know they’re often taken out of our paychecks, or owed come April every year—plus, they go towards essential governmental services. But really, what are they? Where exactly do they go? How do they work? Why do we pay them?
Turns out the answers aren’t as complicated as we may assume—in fact, they can even be explained to children. Not only do taxes teach kids lessons about healthy money practices, they’re also an opportunity to talk about sharing, government services, and even practice a little bit of basic math! Here is how you can explain them to your kids:
What are they?
Taxes are the money that everybody who earns money pays to the government so it can provide us and our communities with things we need in our everyday life. We need police and firefighters to keep us safe, teachers and schools to help us learn, and hospitals and doctors to keep us healthy. When we pay taxes, we’re making sure that not only we do get these things ourselves, we’re also helping our neighbors get the same.
On top of taxes on the money we earn, most states also require people to pay sales tax, or taxes on money we spend, whether it’s at the grocery store, toy store, or candy shop. In your adult life you’ve probably come across property, estate, gift, hotel, and a few other types of taxes, but you can skip those conversations till the kids are a bit older. Since nearly all adults encounter income and sales taxes, start the conversation there.
The best way to explain taxes to little kids is to explain how what we pay into themends up benefitting ourselves and others—for the most part.
Where do they go?
Good news: taxes aren’t some big, intangible concept. Taxes pay for real things that kids interact with daily, so explaining their impact will be a cinch. Make the connection between the concept of “taxes” and concrete examples your kid will understand.
Start off by describing some of the fun ones that kids may even get excited about. Is your kid’s favorite park or playground maintained by the city? Does your kid love everything about outer space, and those awesome NASA spaceships? Did your family take a vacation camping in a national park? Do they want to be a firefighter when they grow up?
Then, move onto necessary things with which kids are familiar. Do they remember going to the hospital for a checkup? Do they go to a public school? Do they like to point out the city hall building every time you drive past, or a cool bridge, or big city buses? Point out how all of these things we might take for granted are paid for by taxes!
Finally, explain that not everything taxes pay for benefits us personally (or at least, not all the time), but taxes are important just the same. Taxes are money that is sometimes given to people like veterans, people who lost their jobs, or retired folks (perhaps like grandma and grandpa!), who may need help paying for groceries, doctors, or a home. Try explaining this last category as a kind of paycheck provided by the government for people who need it, similar to how their own parent earns money so they can eat and have a place to live.
How do they work?
Though at this time of year income tax is at the forefront of everybody’s minds, it can be difficult to explain taxes on income that kids don’t necessarily understand to begin with. Sales tax is a concrete, relatable way of explaining tax to kids (unless, of course, you live in states without sales tax: Delaware, Montana, Oregon, and New Hampshire). Try this simple activity:
On a trip to the store, pay for something with a flat price ($1.00, $5.00) then after the cashier rings you up, show how the final price is actually a few cents more. If your kids are old enough for a little basic math, have them (or help them) count the difference. Those cents add up to all those parks and playgrounds you’ve explained!
You can also give your kids real life experience by “taxing” their allowance, cash gifts, or money earned from chores. Collect a percentage of their “income” and set it aside. Use that money for something that benefits the whole family, like a group trip to the ice cream shop, or for a donation to a charity of their choice. Emphasize that this money is different from the savings we keep for ourselves, because it will be used for things that benefit other people, too.
Why do we pay them?
Taxes aren’t just about ourselves; taxes pay for things that help other people, too. They’re how we contribute to our communities—and they’re built right into how we spend and earn money. Next time you have to add an extra quarter to your bill, think about all those playgrounds, kind doctors, and cool spaceships that your money is paying for!
Though taxes may seem burdensome as adults, they’re actually a useful opportunity to teach kids a lesson about sharing. They’re an example of how we continue to “share” as we grow up into adults! Down the line, you might have more complex conversations about taxes being taken out of their first paycheck, how filing taxes works, and a more complex breakdown of why taxes are important. You may even invite your kid to watch you file your own taxes. But for now, stick with the basics! You may very well be surprised by how much your kid can understand.