Faith & Life

GETTING A TAX REFUND?

ASK FAMILY MEMBERS HOW TO SPEND THE MONEY

By Cathi Douglas     4/19/2017

“As Jesus passed on from there, he saw a man called Matthew sitting at the tax booth, and he said to him, “Follow me.” And he rose and followed him.”
—Matthew 9:9

 

If you and your family are among the lucky ones who will receive a tax refund this year, it can be an enlightening exercise to include everyone – from the youngest to oldest – in the decision about how the family should spend the refunded money.

“The arrival of some unexpected money might offer a ‘teachable moment’ for families to discuss what it means to be a good steward of resources,” says Katie Dawson, director of Parish Faith Formation. “Of course, this fits into a larger strategy of preparing children for real-life choices. Depending on the ages of the children, once parents have determined that there really is ‘extra’ money, they could call a family meeting to discuss some options.”

Financial experts, as well as childhood specialists, recommend that when it comes to teaching children financial skills, the younger the better. In a 2016 Wall Street Journal story, “What’s the Best Way to Teach Financial Skills to Children,” writer Veronica Dagher interviews three business leaders, including Nathan Dungan.

Dungan, founder and president of Share Save Spend LLC, which helps educate families about money, notes: “One of the most important reasons to equip youth with critical financial skills is that it has the potential to significantly enhance their quality of life.”

Involving children in a discussion about taxes, why taxes are levied and what taxes pay for can underscore for all family members the importance money plays in society, and how state and federal taxes are spent with the community in mind.

“Not only will teaching children about money equip them to achieve typical financial goals such as saving for college, but it will also help them address qualitative issues such as the impact money will have on their relationships,” Dungan says.

Dawson says parents can teach their children about how a tax refund windfall can be divided in several ways to help the family:

  1. A portion can pay off credit card debt, unexpected car repairs, and other debt.
  2. A second portion can be donated a charity, with the family members offering their input about which nonprofit organization should receive the money.
  3. The remaining funds can finance a family outing, with costs not to exceed the final amount.

 

“The children may ask some questions about why they can’t just spend the whole amount of the refund,” Dawson says, “allowing parents to explain that we always need to think of sharing the gifts we receive (thus the charitable donation) and about the hidden costs of using credit cards in the long run (so we’re going to pay off that bill).”

While a family discussion about the many ways to spend tax refund money is a perfect time to discuss finances, parents must take care to avoid burdening the kids with too much information.

“Children don’t have the same emotional capacity to manage information about a job loss or a significant downturn in the market,” Dungan warns. “Another common mistake: expecting children to be perfect with money.”

Catholic parents interested in an ongoing discussion about money and the faith may want to study one of several books that offer sound financial solutions based on sacred Scripture and Catholic teaching. One of them, by former Fortune 500 businessman Phil Lenahan, is “The Catholic Answers Guide to Family Finances.” The book, which contains simple worksheets, is designed to help Catholic families straighten out their finances, plan the family’s financial future and avoid the financial problems that plague so many families and ruin many marriages.

 

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