I was dropping my children to school one day last week when a fire engine raced past, lights flashing and sirens wailing. My son piped up from the back seat:
“Who pays the fireman?”
While my son might be a little young for a lesson in taxation, he’s not too young to understand that we all have to chip in to pay for the amenities we share –
roads, pavements, zebra crossings, hospitals, ambulances, police, parks and even fire engines.
Put as simply as that, the idea of paying tax makes sense.
I’ve heard of parents who teach their children the hard way – by "taxing" their pocket money. I think a better solution is to encourage children to put a percentage of their pocket money into a savings account, so they can learn about saving at the same time as getting used to handing over a portion of their "earnings".
Lots of banks offer savings options for young people, like CommBank’s Youthsaver account. Every month that you put money into your Youthsaver account and don’t take any out, they’ll get bonus interest as a reward for being a good saver!
Understandably, impulsive teens are reluctant to tie up their savings for long periods of time, so CommBank’s Youthsaver is an at-call account giving them access to their money whenever they want. Very useful for snapping up a bargain or buying last-minute concert tickets.
But let’s get back to tax…
For teenagers starting their first job, it can be quite a shock to see what’s left after tax has been deducted at source. As parents, you can help by explaining that the tax-free threshold is currently $18,500, so job starters should receive most (if not all) of their tax back.