3 Quick Ways to Show Kids How Taxes Work

Most teens grow up hearing about taxes but have no idea what they actually are or how they work. Then their first paycheck arrives, and they wonder, “Who’s FICA? And why did they take my money?”

Taxes don’t have to be confusing. With a few simple examples, you can show kids what taxes are, why we pay them, and how they affect real life.

1. Use Their First Paycheck (or Your Paycheck or a Sample One)

The easiest way to explain taxes is by using real numbers they can see.

• Show the gross pay: How much they/you earned before taxes.

• Show the net pay: How much they/you actually took home after taxes.

• Point out the deductions: Federal tax, state tax, Social Security, and Medicare.

Example:
If your teen made $200, show them how $30 might go to taxes, leaving them with $170. Explain that taxes fund things like schools, roads, and emergency services they use every day.

Action Tip:

• If they don’t have a job yet, print a sample paycheck from online or make a fake one together so they can see how it works in real life.

2. Do a Hands-On Tax Activity at Home

Sometimes kids need a visual, interactive way to understand.

• Give your child 10 one-dollar bills (or use Monopoly money).

• Say, “This is your $10 paycheck.”

• Then take back:

  • $1 for Social Security

  • $1 for Medicare

  • $2 for federal and state taxes (adjust as needed)

• Show them what’s left: $6.

Example:
“This is how much you actually get to keep after taxes. The rest pays for things like roads, schools, fire departments, and hospitals.”

Action Tip:

• Ask them what services they use…like libraries, trash pickup, public parks…and point out that taxes help pay for all of it.

3. Show How Taxes Impact Real-Life Decisions

Teens need to see why taxes matter beyond just taking money out of paychecks.

• Show them a sales receipt where sales tax was added.

• Talk about how gas taxes help fix highways.

• Explain property taxes pay for local schools and firefighters.

Example:
Fill up the car with gas and show them: “Gas costs $3.00 a gallon, but part of that goes to the government to keep the roads safe and paved.”

Action Tip:

• Have them look up a local service (like the fire department) and see what percentage of its funding comes from taxes. It makes the connection real.

Bonus Tip: Talk About Tax Refunds

If you get a tax refund, explain it simply:

• “We paid too much in taxes during the year. Now the government is giving some back.”

• Show them your refund amount so they see how it works in real life.

Quick Wrap-Up

Taxes can feel complicated, but with real paychecks, simple visuals, and real-life examples, kids quickly understand the basics:

• Taxes pay for things we all use.

• The amount you see on your paycheck isn’t always what you get to keep.

• Taxes affect almost every financial decision we make.

The goal isn’t to turn them into tax experts (yet)…just to give them a clear picture of how it works before adult life hits.