Text Size + -

Newsletter Sign Up

Receive educational information in your inbox every week!

Financial Tip

Oliver Wendell Holmes, former Justice of the United States Supreme Court, once said, "Taxes are what we pay for a civilized society." Although people work hard to meet their needs and the needs of their families, there are some things they cannot purchase themselves. For example, the taxes paid to state and local jurisdictions help pay for police and fire protection. These taxes also pay for the operation of the local governments, and for local recreation areas such as parks and other public facilities.

On the national level, federal income taxes help pay for defense for the country. They also pay for capital facilities such as highways and other transportation services, and to help those who are poor or ill. These are all services that individual citizens cannot purchase the way they can buy food and clothing and the other necessities of life. When people live together in a society, all of its citizens bear the cost of providing such services. Taxes are the means by which the society raises the money to cover these public costs.

The United States Department of the Treasury has a number of fact sheets that can help people better understand the various taxes imposed in the United States. These include: Economics of Taxation explains how taxes support government services and benefit the country's citizens. Writing and Enacting Tax Legislation explains the process for developing and passing legislation into law.

In addition, Lesson 1.5 of the Yes, You Can Curriculum includes classroom examples of how taxes are collected and used by the various jurisdictions.

Source: Adapted from United States Department of the Treasury.

Financial Literacy Month

In 2005, the U.S. Senate passed (by an overwhelming vote of 48 to 2) a bill declaring April as Financial Literacy month. 

President George W. Bush elevated the importance of financial literacy by signing an executive order establishing the President’s Advisory Council on Financial Literacy. It’s goal is to improve financial education efforts for youths in schools and for adults in the workplace. In 2010, President Obama furthered the cause by signing Executive Order 13530 and created the President's Advisory Council on Financial Capability to assist the American people in understanding financial matters and making informed financial decisions.

While this groundswell of support for financial literacy in schools is certainly needed and welcome, it is important to remember that kids learn the most about money by watching the adults around them. In addition to the award winning Yes, You Can curriculum, there are a number of other resources available to help you understand the essential facts about money so you can pass along good money habits to your kids. Some of these include these resources available through the Federal Trade Commission (FTC):

  • Money Matters offers short, practical tips, videos, and links to reliable sources on a variety of topics in English and Spanish, ranging from credit repair, debt collection, job hunting, and job scams to vehicle repossession, managing mortgage payments, and avoiding foreclosure rescue scams.
  • Free Annual Credit Reports offers details about a consumer's right to a free copy of his or her credit report from each of the three national credit reporting agencies, upon request, once every 12 months. Reviewing one's credit report regularly is an effective way to deter and detect identity theft. 
  • You Are Here is a virtual mall where kids experience the FTC's mission by learning about advertising, competition, and how to protect their privacy.

Teachable Moments

To become knowledgeable about financial information, begin by understanding the industry terminology. Here are a few financial terms that appear regularly in business publications and financial documents.

  • Dow Jones Industrial Average (the Dow) - the oldest and most widely quoted stock market gauge. Consisting of a select group of 30 stocks, experts believe it represents the overall market at any moment in time.
  • S&P 500 - a stock market index containing the stocks of 500 Large-Cap corporations (corporations with a market capitalization of $5 billion or more), most of which are from the United States.
  • Share of Stock - represents a fraction of the total ownership of a corporation.
  • P/E Ratio (price to earnings ratio) - a measure of the price paid for a share relative to the annual income or profit earned by the firm per share.
  • Dividends* - earnings from corporate stock or credit union share accounts.
  • Liquidity* - the quality of an asset that permits it to be converted quickly into cash without loss of value. For example, a mutual fund is more liquid than real estate.

*Glossary terms reprinted from National Standards in K-12 Personal Finance Education; 3rd Edition, 2007 with permission from Jump$tart Coalition for Personal Financial Literacy.