Teen Tax Gurus: Why Parents Should Teach Their Kids About Taxes Now
Written by: Yaël Bizouati-Kennedy
3 April 2024
Volunteer teens in a California high school are now helping run a tax-return clinic — largely thanks to an Internal Revenue Service (IRS) program which trains people to prepare taxes and make a difference in some underserved communities, The New York Times reported.
The IRS’ Volunteer Income Tax Assistance (VITA) program provides training to give free tax help for low-to-moderate income families who need assistance preparing their tax returns, according to the agency’s website. These include people who generally make $60,000 or less, persons with disabilities, the elderly and non-native English speaking taxpayers who need assistance in preparing their own tax returns.
All individuals — including IRS employees participating in the VITA programs — who answer tax law questions, instruct tax law, prepare or correct tax returns and/or conduct quality reviews of completed tax returns must be certified.
The students at the California high school receive not only credit for their help, but “a kind of object lesson in personal finance,” according to The New York Times.
“Ask the right questions of the person behind the numbers and you can learn a lot about how the world works and the paths to making your way in it,” The New York Times added.
As Chris Urban, CFP and founder at Discovery Wealth Planning, argued, personal finance is an extremely valuable (and practical) subject for kids to learn at a young age.
“The benefits will literally last a lifetime. Taxes, in particular, are an important concept because kids should learn that it’s not what you earn but rather what you keep that matters,” he added.
Why Parents Should Teach Their Kids About Taxes Now
Some experts argue that these high school volunteers are a prime example of the importance of teaching kids and teens about personal finance and specifically taxes, as all the money lessons involved put them on a path to being financial grownups.
“For example, they can learn that if they save money deliberately in certain accounts, like a Roth IRA, they can avoid higher taxes later on in life,” said Bobbi Rebell, CFP and founder of Financial Wellness Strategies.
According to Rebell , teens will be better prepared to understand that when they get a job, the salary their employer tells them they are being paid will not be the amount of money that they keep.
“The numbers can be alarming at first, but that is the reality,” she said, noting that this will help them budget and understand what it really costs to live the life they want — and in turn, how much they have to earn.
“It can be painful at first but it is a really valuable lens into their future as financial grownups,” she added.
Learning About Broader Financial Concepts
Taxes can also teach important lessons about the cost of different kinds of debt. For example, the interest on credit card debt is not deductible.
“But the interest on a mortgage on your primary would generally be deductible, so it costs less,” said Rebell . “That might get them thinking differently about home ownership compared to renting.”
In addition, knowing that there are tax benefits to saving in a retirement account could motivate them to start saving earlier, she said.
Rebell also added that the IRS website is surprisingly easy to navigate and very clear in its language. As such, teens can easily look things up and understand quickly that certain behaviors are rewarded.
“For example, capital gains taxes — which are tied to investments, are often lower than the taxes on income,” she said. “Teens can quickly learn, and be motivated, to be investors.”
On the flip side, they can see that being day traders can be very costly in terms of taxes. This reality might inspire them to be more thoughtful and intentional when making investment decisions, she added.
