According to the Tax Foundation (www.taxfoundation.org), Tax Freedom Day will be on April 23rd in 2008. What is it and why should it matter to your family? Does it matter to anyone but the parents?
What is Tax Freedom Day?
It is the day that Americans will have to work to before they have earned enough money to pay this year's tax obligations at the federal, state and local levels. Of course, that's an average for all working Americans. But it's still nearly four
months' of work!
The good news is that it's three days earlier than in 2007, reversing the trend that had been occurring for the past four years. That change is largely due to the tax stimulus checks that should be rolling out starting next week and the economic
slowdown. The not-so-good news is that Americans are working longer to pay all their taxes than they are to pay their combined housing, food and clothing costs. Of course, these are averages for all Americans, so there may be some differences for
your family.
Making it part of family financial education
It can be easy to see why Mom and Dad would care about how much taxes are costing their family. But does this really matter to kids? Most of them, even working teenagers, don't have to pay much in taxes, if any.
So income taxes may not matter. Then why worry about how to make it part of the family financial education?
It's important for parents to understand the impact of taxes on their lives - and the impact that taxes can have on their families. Tax Freedom Day is a reminder of that impact because it is such an easy way to show how much people work just to cover taxes. And it can be a reminder that financial education is more than allowances and piggy banks.
So at some point, parents need to explain what taxes are to their kids. But the best place to start is not likely income taxes - it is sales tax.
Why? Because one of the first money lessons that kids learn is related to buying something they want. And they can see that the candy that had a 99 cent tag on it really costs them over a dollar at the cash register with the difference being sales tax. And with very few exceptions, sales tax is everywhere. So it deserves to have a place in money education.
And it just might make the income tax discussion a little easier when that time comes.
Jennifer Peek is a CPA/MBA and mother of two. She writes about all aspects of kids and money at her website, www.money-and-kids.com. Visit her there and sign up for the free monthly newsletter at www.money-and-kids.com/subscribe.html