I think that one of the inevitabilities of life, taxes, is something that we should learn about early in life. From why we need to levy taxes, how they affect your life, from your job, business, to what you buy, it’s a good thing to know about taxes. Sadly, school doesn’t do this as well as it should, or at all, so it’s up to you parents to teach your kids about taxes.
Do you have a teen with a part-time job? This is a good time to show them how taxes work and helping them prepare their tax return come the following tax season. With online resources, it would be easy for them, let’s face it their more tech savvy than their parents, to file online. Better yet, get them to find a tax preparer on their own, so they can see what it’s like when they’re an adult and have to deal with their taxes.
The younger we teach them to do something, the better they can handle it as an adult. You’d be surprised how many young adults (early to mid-twenties) come to us, and have absolutely no clue what to do, or even what they need to provide to us.
The good thing about filing a tax return each year the teen has a T4 is that this accumulates his RRSP contribution room, so when they turn 19, they can start to contribute to an RRSP. Or, for later in life the monies they earned as a teen are contributing to that future contribution limit.
Of course, when they turn 19, it’s time to register for the GST/HST tax credit too. If your child has the confidence to figure that on their own, then the better. Get them reading about taxes, and what they need to do for filing their taxes.
When your kid, no matter the age, wishes to buy something this is a good time to teach them about consumption taxes (GST/HST and PST). It’s fun to save for something they want, they know how much that toy will cost; however, they go to buy it and now don’t have enough money as they didn’t know about the taxes (from 5% to 15% depending on the Province). They’re now sadly disappointed and have to save more for the taxes.
If you teach that whatever they want to buy they need to think about the consumption taxes, then they know they need to add more to their savings to cover such taxes. Here in British Columbia you need to add 12% onto most purchases, food is mostly an exception except for pets. For example, if your kid wants to buy a toy that’s $39.99 then they need to add $4.80 for GST/HST ($2.00) and PST ($2.80). The kid needs to save $44.79.
As a parent, you should think about teaching your kids about taxes as early as they would be able to understand. This way the kids won’t be disappointed when buying something, nor, later in life, will they get in trouble with Canada Revenue Agency because they didn’t file their taxes for five years. Ideally, the schools would teach such things too, maybe parents need to start demanding that schools start teaching kids about real life. As Crosby, Stills & Nash sang, “Teach Your Children Well”.
Where Your Tax Dollars Go (Department of Finance Canada)
CBC News report, Feb 2018
Doing Your Taxes (Canada Revenue Agency)
Get ready to do your 2017 income tax and benefit return (Canada Revenue Agency)
Ways to Make the Most of your Pandemic Savings
Who is Required by the CRA to File a Tax Return in Canada?
Capital Gains and Your Taxes
2021 Tax Changes That you Need to Know About
Personal Finance Resolutions for 2021
Tips to Avoid the Post-Holiday Finance Blues
Need Money? Should you Withdraw from your RRSP?
Financial Literacy Lessons Should Begin Early in Life