Chances are your child has already heard you talk about taxes. After all, how many times have you commented about the bill in a restaurant, got excited about a tax refund or complained about having to pay the tax? Your child has likely heard more tax talk than you realize. But have you taken the time to explain what taxes are and how they work?Teaching your child about taxes can happen at any age: the trick is to present age-appropriate information in engaging, bite-sized bits.
For grade-schoolers, explain that taxes are money we pay to help keep things like parks, schools, roads, hospitals, fire stations, and post offices running. That money is also used to clear snow in the winter and cut the grass on the soccer fields in the summer. Turn a car ride into a game, by having children point out places that will charge tax. Winner gets to decide on dinner.
For high schoolers, start by explaining the kinds of taxes we pay. Talk about how Canadians are charged sales tax, property tax, and income tax and that we contribute to social security, and how we benefit from that. Explain how different provinces charge different sales taxes.
For grade-schoolers, head to the local dollar store (but follow safety protocols) and buy a one-dollar item. Show how that item costs more than one dollar on the receipt, because of the added taxes. Explain how taxes are added to things you buy in stores, the food you eat in restaurants, and services like haircuts, sports activities, and the electricity bill.
For high schoolers, use one of their pay stubs to show how taxes are taken off each pay cheque. Explain how the more you make, the more taxes you pay by showing the different tax brackets Canadians fall into and how these differ by province.
For grade schoolers Board games can help make learning fun: introduce a tax component by adding your own twist to an existing game. While younger kids learn how to handle and save money in The Allowance Game, you can introduce taxes on “wages” and purchases. Though the Buy It Right game uses “money” resembling US currency, it teaches kids how to buy and sell wisely, giving you opportunities to add tax lessons into the mix.
For high schoolers Put your own spin on Monopoly, by adding a 10% tax to every property bought and sold. When players land on water works, railroad or electric company spaces, explain how the taxes we pay help keep these running. It’s also a great opportunity to explain what purchases include luxury tax. Or, play the Game of Life and introduce taxes on money earned and spent.
This resource has a list of 50+ games that teach kids about finances; see how you can put your own creative spin on each, as a way of teaching taxes to your kids.
Explain that there are ways to help you lower the taxes you pay. Pull up an online tax form and show the fields that have to be filled out. Explain how things like charitable donations, sports programmes, and RRSP contributions can help reduce the amount of tax you pay.
If your teen seems ready, talk about ways their money can grow tax-free. Explain the benefits of RRSPs, how they can contribute to a Tax-Free Savings Account when they are over 18, and how you used a Registered Education Savings Plan to help save for their post-secondary education. If you don’t have an RESP yet, it’s easy to open one.
The earlier you start teaching your child about taxes and how to put aside money to pay for them, the better. By doing so, you’ll also be teaching about the importance of saving money. Think of it as two important life lessons rolled into one!
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The contents are provided for informational and educational purposes and are not intended to provide specific individual tax advice. Please consult with a tax professional about your particular circumstances.