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How to Teach Your Kids About Money and Taxes

It is never too early to start teaching your children about money.  However, you may be wondering how to go about doing so.  This can then become overwhelming, especially when you look at everything that there is to teach them: earning, saving and spending money; paying taxes; and retirement. You may even wonder whether or not your children will even be able to learn all of this.

As you start to think about this you will certainly begin to find the answers that you need.  One such idea is to give 3 different mason jars to each of your children.  These mason jars are used to represent the different things about money. The first jar should be labeled “spend” as this is jar of money that your children will get to spend on anything that they want.  The second jar should be labeled “charity” and will not be used by everyone.  However, as parents it is still our duty to teach our children about giving money to those who are less fortunate than them so that they can make a difference.  You will not want to tell them right away about the small tax write-off that you can get from charitable contributions on tax returns.  The third jar should be labeled “savings” and should receive 25% (25 cents of every dollar) of the money.  This is a great jar because whenever it is combined with the “spend” jar your children will have the opportunity to purchase the bigger ticket items that you may refuse to purchase for them.  The fourth, and final, jar should be labeled “taxes” and receive the remaining 15% of the money. You can then put this money into the bank for your children to get back whenever they turn 18 and they are heading out into life.  Your children can consider this as their reward for “retiring” from childhood into adulthood.

If you want to teach your children about credit, then you can act as their creditor.  This is for those times when your children want something but do not have enough money between their “spend” and “savings” jars to purchase the item themselves.  You can then purchase the item for them but charge them 1.5% interest.  It is wise to write this down on a note that is attached to your child’s “spend” jar so that they will not forget to pay you back.  Of course, an added benefit to doing this is that your children will not like owing you money and thus they will stop begging for things.

This system will give your children a head start on the notion of living within their means.  You may be surprised to find yourself watching your own spending habits a little closer as well.  If you still do not believe that this method could possibly work for teaching your children the hard facts of life, then give it a try and see for yourself.  In the end, you may just wind up surprising yourself.

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