5. Everyone Has to Pay Taxes–Even You
Explain to your child that everyone has taxes taken out of their paychecks to keep things running smoothly in the country. Tell him that the salary he sets up for himself for his job–mowing the lawn, doing household chores–isn’t the same amount that he’ll be getting in his take-home pay.
Best Approach: Starting at age 10, put your kid in a 15% tax bracket and have him deduct that money from his allowance into the family tax jar, suggests Godfrey. “Of course, you’ll need to explain that, in real life, this money goes towards things like keeping our roads clean and safe, but at home, your family can vote on a quarterly basis how to use the tax money,” says Godfrey. “This will help avoid the freak out later when he gets his first paycheck and he’s like, ‘Who’s FICA, and why is he taking money out of my salary?’”
Related Links From LearnVest:
- The Best Ways to Teach Your Kid to Save
- 7 Things Motherhood Has Taught Me About Money
- Sign Up for LearnVest’s Debt-Diminishing Financial Bootcamp