My 16-year-old daughter held her W-4 inches from her face as she read the super fine print. With all the boxes and symbols that looked like hieroglyphics, she turned to me as if I were the Rosetta stone. This is my daughter’s first W-4, and it’s also her first real introduction into taxes. I know, it’s nothing but parties over at my house.
As parents, we try to shield our children from the unpleasant things in life. We tell them that the dog went to the farm. Aliens come in peace. Taxes aren’t that big of a deal. Those are the little white lies we say in order to keep their world innocent and pure. But like space aliens eventually forcing us to dance a nice shanty for their entertainment, taxes will eventually invade their lives.
My daughter has had some experience with taxes, such as sales tax. But when you’re buying Barbie Dolls or Sour Patch Kids, it’s not something they think of that much. When my daughter gets her first paycheck in 2 weeks, she is about to get punched in the face by FICA.
“Dad, help,” she pleads and it’s time to shatter her world. Or at least, teach her how these things work, and why the pain is necessary. And it couldn’t be better timing because April is Financial Literacy Month and I’m a writer. I get to bring in some experts.
Where do we start with complicated financial subjects?
“Their first paycheck is a chance to get your teenagers attention,” states CEO Laura Levine of Jump$tart. Jump$tart is a publisher of financial educational materials and sets the national standards.
“Don’t panic, and teach them a little at a time,” Mrs. Levine states.
I like anyone that automatically tells me not to panic because in my world, it seems that every day I’ve missed something. An opportunity to teach my kids, or a volleyball practice that was scheduled last week. Panic is my second nature.
I find Mrs. Levine’s advice solid, though. Sitting our teenagers down with a copy of the tax code is basically the best way to have them fall asleep. I should know, both my parents were accountants and complicated mortgage write-offs were often my bedtime stories.
But here, Mrs. Levine states that, “we have a chance to take the hypothetical and make it reality. It crosses the threshold to a relevant lesson.” And that’s what I’m looking for as I teach my kids.
What is happening in their lives that is a teaching moment? These unplanned and often unexpected moments present themselves and, while not panicking, I do my best to take advantage of the opportunity.
However, Mrs. Levine does have a warning for us. “Many checks are direct deposited, and your kids may not have their pay slip in their hands. Go find it. Go over it. This will help.” This is something that I never considered as my last minimum wage job was close to 25 years ago.
Hit the big areas.
I can’t expect my kids to understand the entirety of a W-4 our taxes in general. Mainly because I pay someone to understand them for me. I don’t know what I can deduct because I’m a writer, and what would have the IRS come to my home in a Blackhawk. But as I go over the paperwork with my daughter, I can start to give her some of the bigger ideas.
“Do I have any dependents?” she asked.
“Only if you count the dogs,” I say. And then I quickly backtrack because I didn’t’ realize my daughter was taking me seriously. However, I maintain that humor is a great way to make complicated subjects more digestible. It may sound silly, but it anchors that lesson in a point in time. Any way you can do that, even with something small, will help your kids remember in the future.
I explained what dependents were to my daughter and why she doesn’t have any. And no, the dog doesn’t count. We then went over her filing status and I asked if she was planning a surprise wedding. This did bring a big conversation of why the government needs to know and why not. The tax liabilities (as far as I know), and the benefits.
Finally, we went over her social security number and how it is used to track her work history. Which brought us to paying into social security and why that’s important.
“But I’m never going to use it if it’s going to be all gone in 60 years,” she said. And it was at that point, I ended the lesson because there are only so many dreams I can crush for her at the moment. She also noticed how her actual paperwork was just one page while the instructions droned on for 3 more. It serves as the perfect introduction to taxes in my opinion.
I realize the irony that our kids don’t learn more about this before their first job. Only 24 states have any mandatory education when it comes to financial matters, and in my district, this doesn’t happen until they are seniors. But at the same time, it does give me a chance to make sure she knows the basic outline of something so complicated.
Jump$tart encourages states and schools to start teaching the basics in elementary school and I can’t find fault with that. Budgets, investments, taxes-all have the ability to be very boring but also will affect them for their entire lives. And as parents, it is our responsibility that we at least provide them with a foundation.
You can always get more resources at Jumpstart.org and join their campaign CheckYourSchool.org. It’s my next step as my 14-year-old son wants to now talk about bitcoin.
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Shannon, this article is very timely. Ironically, I just posted something on our website. I agree to stick to the basics. A tax code book would put us all asleep. Your proactive suggestions are excellent. Let’s challenge those with the knowledge and understanding to coach and mentor others.
Thanks for a great article!