Hey everyone, it’s Whatever Wednesdays again. This is kind of a Finance Friday post, but since this isn’t real money, and more about teaching my kids a concept, I’ve opted to put it in Whatever Wednesdays. Today we’re going to talk about “Teaching My Kids About Taxes”.
Teaching My Kids About Taxes
I felt it was important that the coin has immediate, inherent value to start with. For that reason, I chose Chuck E Cheese tokens because the understanding is simple. You put the token in the machine and you get to play a game. It’s a very straight forward transaction.
From that, we’ve moved on to rewarding our children with tokens for doing something good. For example, when they clean up their toys or help set the placemats for dinner or something out of the ordinary. They’ve started earning tokens this way. Then they can save up their tokens and use them to buy something they may want. Every once in awhile they’ll ask me to bring down their token jars and count their tokens so they know how much they have.
Just recently we made a run to the store because we had to buy them new pajamas as theirs were too small. So they counted their tokens before we went to the store so they knew how much they had. They’ve been saving for quite a long time so Kylie had something like 96 tokens and Lucas had 47. To make the math easy, I made each token worth $1. I may need to revise this since they seem to be earning tokens too quickly for my comfort. However, I am a man of my word and that was the value they understood.
What did they buy?
Well Kylie first wanted to use all of her 96 tokens to buy some kind of doll kitchen thing. Since they are her tokens, it is ultimately her decision. However, I reminded her of how long she took to save those tokens and advised her to look at other things first. Additionally, the doll kitchen thing didn’t even come with a doll. To be honest, to me, this toy offered poor Value Cost Ratio. That said, I said you can keep that in mind, but why don’t we look at other things instead.
After looking up and down the aisles, she finally settled on a few smaller toys, which were $10, $12, and $5 — for a total of $27. I think this was a significantly better value than the doll kitchen. I forget exactly what they were, but I believe one of them was a Polly Pocket and a little Shopkins house maybe?
My son knew exactly what he wanted, grabbing it off the shelf as soon as he saw it. No amount of looking at other options was even given consideration. You can see the picture above, it’s LEGO War Machine Buster from The Avengers. I actually didn’t buy it from the store, because it was significantly cheaper on Amazon. So I had to convince him to wait until it came from Amazon. As you would expect, he was very sad, but he got over it after I showed him that I bought it for him on my phone.
It ended up being $27. (saved like $10!)
By the way, he loves this thing and plays with with it every night. He really loves The Avengers and Spiderman.
What about Taxes?
Ah yes, this post was about implementing taxes. So what happened was that when we got home is that Kylie took out her tokens and counted out 27 tokens to me. I then took 2 more tokens from her token cup and explained to her this was going to taxes.
“What are taxes?”
Ah yes, now it’s my time to explain. I answered her question with a question. “Who pays for the roads we drive on? Or the lights on the side of the road? Or for your public school?”
My question was met with a shrug, as you would expect. I explained that mommy and daddy and everyone on Hawaii pay taxes in order to provide things like that. So some of the money we earn and the money we spend goes to the government to do those things for us.
“Oh” was her response.
Yea I know. Taxes don’t sound very fun do they Kylie?
Anyways, I think it’s a little too mean to tax her on the small amount she earns from Mommy and Daddy, Inc. However, I think she should understand that when she spends money it isn’t just the dollar amount shown, it’s always more than that. As such, to make the math easy, I’ve decided to implement a 10% tax, rounded down to the nearest whole number. In this case, 27 tokens has a “tax” of 2 tokens.
Now the question is where does the tax go for the “good of society” in our household? How do you make them understand that taxes aren’t just “lost money”?
I’ve implemented a 3rd token cup.
This 3rd cup will be marked Taxes, and amounts of Taxes off of token purchases will go to this cup. Tokens in this “Taxes” cup can be used for the good of the family – something we can all enjoy. I would imagine it might be something small like renting a movie or maybe something a little bigger like going out to a movie or going out to lunch or dinner. It could also be used for some toy that both Lucas and Kylie want and are willing to share, which is probably the more likely outcome. However, there would be an understanding that it doesn’t belong to either of them since it was bought with “Tax Money”.
Does Lucas understand?
Probably not yet, at least not to the level that Kylie does. However, he will someday. For now, he understands that if he is good and does a good job he can get tokens. He can spend them at Chuck E Cheese or save them to buy things with. He also understands that some of his tokens go to another 3rd cup.
As they get older, tokens will be replaced with real money from an allowance from doing their homework and chores. As you might expect, they’ll be taxed on that too.
While it might seem “mean” or “evil”, I think it’s important that my kids understand that money has to come from somewhere. There is also the sense of the more you make, the more taxes you pay and the more you spend, the more taxes you pay. I would like for them to understand the true value of a dollar as soon as possible. In that way, I hope they will establish their own internal Value Cost Ratio at the same time.
The Token Economy evolves — now with taxes!
Agree? Disagree? Questions, Comments and Suggestions are welcome.
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