Financial Literacy Begins at Home

This morning, my six-year-old son Solomon was having breakfast and watching his favorite TV show, Really Wild Animals. (It’s a great show, National Geographic cinematography with quippy narration by — I kid you not — Dudley Moore.)

Apparently the same commercials come on the show every morning, because I heard Solomon reciting along with one commercial as it played:

“Whether you’re buying a new home,” Solomon was saying, “or refinancing.”

Then, to himself, he muttered: “Whatever that is.”

Since Solomon is nice enough to explain to me the differences between an alligator and a crocodile, I explained refinancing to him.

He wasn’t that interested.

He is still trying to understand sales tax. He has been saving up to buy a new Webkinz, the first one he’s buying with his own money, and at first he was horrified to hear about the 8.375% he had to pay above the sticker price. Then when he found out that his money helped pay for police, firemen, streets, and the American Museum of Natural History, he quickly became a fan of taxation.


Taed

My 6-year-old also just found out about sales tax now that the's buying things with his own money. He felt that it wasn't fair to tax "little kids".

frankenduf

I agree with i1der2 (just got that name :))- sales taxes are regressive- I like the story in that it presents the viewpoint of not wanting to pay tax as immature- don't forget, taxes pay for infrastructure- except in Minneapolis

ithaca99

I love the 'unfair to tax little kids' argument -- which shows that one little kid, anyway, has grasped the unfairness of regressive taxation. Awwwwwwww.

I had a look at the Webkinz site. Awwwwwww. I think this is unfair to little kids in a different way, though. As we know, John Stuart Mill was taught Greek from the age of 3 at a time when there wasn't even a Greek-English lexicon -- when he wanted to know a word he had to ask his father, who was trying to write a History of India. We now have wonderful online resources for learning Ancient Greek, Japanese, Chinese, Arabic... Surely it wouldn't be that hard to have something like Webkinz that gave little kids the chance to earn virtual cash for learning such things? It's not as though little kids don't LIKE these things when they're shown them -- I once taught Chinese characters to a class of 7-year-olds in a 2nd-grade class in Oakland, kids whose parents were Nicaraguan and Mexican immigrants, and they had a blast. It's as if sites like Webkinz think kids want to see themselves as cute little pets.

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BrianJBrady

What I find astounding is the power of advertising.

susan@msgen.com

You are absolutely right! Financial education begins at home. Research shows that the most influential person in a child's life when it comes to money is a parent. I have founded a company that is dedicated to financial education for children. Our mission is to provide tools and curriculum to help parents and educators teach kids the skills of personal finance. Our highly-acclaimed, award-winning products have been highly influenced by parents and teachers. If you are looking for resources, please check out MoneySavvyGeneration.com.

Braun Mincher

Anybody who wants to test their own knowledge of Financial Literacy is welcome to take my online 50-question, multiple-choice, Financial Literacy Quiz:

http://www.financialliteracyquiz.com/

We also just released a press release with the 1st quarter quiz statistics in case you are interested in seeing how you compare against your peers (go to the "Press & Media" page):

http://www.braunmincher.com/

Enjoy!

Braun Mincher, Author
The Secrets of Money: A Guide for Everyone on Practical Financial Literacy

Elisabeth Donati

Financial literacy is such a boring word. How about we aspire toward Financial Intelligence. Perhaps if we label it a type of intelligence we'd be able to bring it into the schools as more than an elective!

Yes, it should be taught at home. Problem: how can parents teach something THEY don't know? I've been teaching kids and adults basic financial and wealth building principles in my Money Camps and now Camp Millionaire programs since 2002. Our Creative Wealth for Women program illuminates the dire need for women of all ages to know this information. And my new book, The Ultimate Allowance (not in the usual allowance sense) gives parents a great system to raise financially intelligent kids. For more info, check out http://www.ultimateallowancebook.com or http://www.creativewealthintl.org

Luis

An interesting plee: http://www.etherpopsicle.com/2009/02/telegram-to-barack-obama-investment.html

James Kimmelman

Personally, I feel that we are in an age of innovation. Without financial literacy education in our middle schools and high schools the next generation will be lower on the totem pole compared to European and Asian students. Programs such as Network for Teaching Entrepreneurship (NFTE) had a huge affect on my education in high school during the 1990s. I am now a mentor in a classroom in the DC area. I hope programs like this increase and expand.

i1der2

Did you tell Solomon that a sales tax is an unfair tax? The word "regressive" might be hard to explain to him, but you could have easily explained to him why a sales tax is unfair...though upper-income people prefer regressive tax schemes.

chappy8

Question. Why is that published prices in the US don't include state sales tax? From my travels abroad, this doesn't appear to be the way they do thing in Europe--where the tax seems to be rolled into the price (i.e. if a price is $10 it is tax inclusive)?

Is there a reason for this? It strikes me as political, that is the US views taxes as 'extra', but maybe there is an administrative or historical reason behind it?

wk633

Taxes in Canada aren't rolled in either. I could see the case more for the US where the total consumer tax can vary from county to county. At least in Canada, you'll pay the same price anywhere in the province.

Although also in Canada some confusing situations can arise depending on how much of something you buy. One cookie is a snack, and is GST-able. 6 or more cookies are not GST-able.

debbart

Because there is not a federal sales tax on our purchases - the Feds get our money through taxing our earnings, among other sources. When we purchase items, the tax varies depending on the state, county and/or municipal tax rates, so there's a very wide range of what the tax might be for folks across the country. An internet purchase from a site that has no "brick and mortar" store in your state may have no sales tax at all.

kah

Mr. Dubner, this story is very cute! You refrained from posting a story about your kid until you had a story that is genuinely really cute! The level of taste and acumen shown here is superhuman! I am agog! Rarely can a parent judge his kid's cuteness factor that well. Very cute story.

Hopefully Anonymous

Kah, I agree, the social intelligence of the freakonomics economists is extremely high. It would be great if they were more meta/transparent about how they formulate and and evaluate their own social performances.

http://www.hopeanon.typepad.com

Kirilius

Coming from Europe to Canada I was really surprised and after 2 years still cannot get used to the tax that's not included in the tag price. It seems to me another way to make the goods look cheaper by hiding part of the price. To me it seems a downright unfair practice. No different than all those "handling fees", "convenience charges" and other hidden fees that are usually in the fine-print and you notice only after you hit the "Buy" button.
The argument is that sales tax varies form state to state and from province to province. Okay, but so what?! Base product prices also vary from province to province and even from neighborhood to neighborhood. Why should I care about that?
As a consumer I want to know how much money gets out of my pocket in total. I don't mind paying sales taxes, what I don't understand is Why am I being forced to always calculate before buying something?

There are customer-protections laws in Europe, which forbid sellers to advertise partial prices. Why is there such a difference between the Old World and the New World?

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htb

The fact that every city/county/state has a different level of sales tax is an argument FOR telling every store to include the sales tax in the prices, not against it!

Imagine a tiny town -- just off the highway, with a single traveler-oriented convenience store -- that decided to have a 50% sales tax. All the locals know about it and refuse to shop there. All the travelers are surprised to discover that their $2 snack cost them $3 with tax. The possibility for this kind of nasty surprise would be eliminated if the sales tax had to be included in advance.

The reason we don't switch is because everyone is convinced that if an item costs 99? now, plus 8? tax, then the store will round the "tax included" price up to $1.09 instead of setting the new price to exactly $1.07. We'd gain a level of convenience and transparency, and in some cases lose a couple of pennies for a short while after the changeover. These people apparently forget that prices go up anyway, and over time it all comes out in the wash.

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rphtulsa

i1der2,
sales tax is the most fair way to tax a population. the rich spend more, thus they pay more tax (thus, a sales tax is progessive)...i work hard, try to save money, and yet i'm punished by higher and higher taxes for every extra dollar i earn...income taxation is bad economics, if you ask me...repeal the 16th amendment

Kent

We should get rid of income taxes and enact a consumption tax. That's the most fair, efficient, and ethical thing to do. If you want to maintain some progressivity to the tax structure you also do some wealth redistribution as an overlay. :-o

hatch113

What was his reaction when you told him it also pays for court-sanctioned sex change operations for prison inmates? Or for medicaid abortions? Or for endless "feasibility studies"? Or for needle exchange programs? Or for...

I'm kidding, but I think you get my point.