The following is adapted from Smart, Not Spoiled.

While it’s true that nothing is certain in life but death and taxes, another truth is that taxes tend to be complicated and inconsistent. For example, in 2017, the “Tax Cuts and Jobs Act” was passed, which lowered taxes for families and corporations and stimulated economic growth. However, there’s already talk this year about making major changes to these rates and rules.

Bottom line: taxes can be confusing. There’s no shame in admitting you don’t know everything about them. But when it comes to educating your children about taxes, it’s important to know and explain the basics. 

If kids get comfortable talking about taxes, they’ll pay closer attention to ever-changing tax laws and make better-informed investment choices when it comes to stocks, real estate, and businesses. They’ll also understand the true cost of everything they earn and buy, and they’ll have more peace of mind come tax time. 

To set them up for success, it’s best to have these conversations early in their lives. This might sound intimidating, but the pointers below can help.

Get the numbers behind the story. Our survey shows a clear link between early financial education and future income.

Review the basics

Even if the details of tax law are over your head, you can still teach kids some dependable basics. For example, they should know that taxes are a part of nearly everything they’ll own, buy, or earn. If they own a property, like a house or an office building, they’ll pay property taxes on it every year, just for owning it. When they earn income from a job or investment, they’ll pay taxes on that too.

Here’s a fun way to explain taxes to a small child (for you, maybe not for them). Try giving them a bowl of ice cream — but before you let them dig in, take a bite yourself.

Call it the parent tax, and explain that because you take care of them, you get a part of their “wealth.” Then explain that while real-life taxes aren’t fun, they’re not punishments. Instead, they’re contributions to public services like education, libraries, and roads.

Don’t wait for them to be unpleasantly surprised on the day of their first paycheck. Make sure your kids know that when they might someday earn $30 per hour, and work their 80 hours in two weeks, they won’t be getting that full $2,400 deposited in their bank account from that paycheck. They’ll see the net pay after taxes and deductions. 

Encourage them to seek professional advice

In addition to being taxed on what they earn, sell, and buy, they may even be taxed when they die, through inheritance tax. Or maybe not! The ever-changing inheritance tax is just one example of why it’s important to stay informed. Tax and estate planning laws constantly shift, depending on who the president is, where you live, and a few other factors. 

If your kids know to keep up with the rules, they can readjust their financial planning and strategies accordingly. While this might sound overwhelming, they can take comfort in knowing that tax planning is typically not a DIY endeavor.

Because the situation is dynamic and complex, there are tax specialists and professionals throughout the country. Encourage your kids to seek professional guidance from fiduciaries and experts who can guide them in making decisions based on their situation as they grow up. 

Be transparent and thorough

One of my philosophies as a fiduciary financial advisor is to err on the side of over-communicating with clients. I break everything down for them, so they’re crystal clear about where they stand and what they need to do. Knowing the full story helps them make better decisions. 

The same can be applied to talking to kids about taxes. Even if you don’t think you have a thorough grasp of tax law, you can be transparent and thorough by offering them specific, real-life examples of taxes in your life.

Try pulling out an old pay stub to show your kids what gets taken out of each paycheck and why. Explain how much you pay in yearly property taxes. Show them receipts when you go shopping and point out the sales tax added to the bottom.

Do you wish your family was more open about money? Start with your partner. These ten questions can help.

Equip your kids for tax time

Taxes may not be fun, but they’re not going away. That’s because they’re an essential part of living in a society with shared resources and public services.

Like it or not, taxes form an integral part of every capital transaction — from the medical costs of your birth to estate taxes after you die. 

It’s better to get your kids familiar with the basics of taxation early on. That way they know what to expect, how to plan, and when to ask for help.