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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.

Layaway Can Be a Smart Way to Buy

It seems that fashion trends always come back, so it shouldn't be a surprise that layaway plans have returned. For those who use a cash-only policy, layaway can be a great way to buy both high-dollar necessities and luxuries.

What exactly is layaway? It's a retail plan that allows you to make monthly installment payments on big-ticket purchases. Usually there's a down payment, plus a small fee, to hold the item in the storeroom. Once the item is "paid in full," you get to take it home.

Layaway first became popular during the Great Depression when people lacked money to buy merchandise outright. But as "buy now, pay later" became the norm, layaway lost its appeal. By 2007, Kmart claimed to be the only major chain still offering the option, with 3.2 million customers using its plan.

Consumer Reports says it "applauds" the return of layaway plans, noting that they "were great because they instilled discipline - you couldn't have what you couldn't afford." The consumer watchdog notes that the sluggish economy has generated renewed interest, with many major department stores and discounters again offering plans. Walmart, for example, started offering layaway during the 2011 holiday season, and industry experts expect the program, if successful, to become available all year.

Here are some of the benefits of layaway that customers are rediscovering:

It saves you money by avoiding store credit card rates that can exceed 20 percent.
It helps you afford higher-quality items that provide more durability and desired features.
It locks in the price and ensures the availability of items you don't need yet, such as seasonal clothing, furniture for your new home, an engagement ring - or even a crib for a new baby on the way!

As a smart shopper, make sure you read and understand the plan's requirements, including any cancellation fees, and keep detailed payment records. Check with the Better Business Bureau to ensure that the retailer is in good standing. If it closes its doors, you could lose money already paid.

Today, layaway is no longer limited to brick-and-mortar stores. Online shoppers can now take advantage of options such as elayaway.com, which provides plans for dozens of well-known retailers that sell clothing, electronics, mattresses, housewares, appliances and other merchandise.

The start of the year is also a good time to check with your bank to see if it offers a holiday savings club, another traditional layaway-style savings plan. The accounts earn a small amount of interest, but the main advantage is that you'll have cash in hand by December for buying gifts, helping you resist the temptation to run up credit card bills.

The adage: "Good things come to those who wait" is certainly true with layaway where patience and discipline can pay off.

Teachable Moments

When your kids want something they don't have the money to buy, help them sign up for a layaway plan. They'll gain experience in disciplining themselves as they figure out how to earn the money, save it, make regular payments and track their progress. They'll also learn the value of "delayed gratification" when they discover the good feeling that comes from acquiring what they want through their own "sweat equity."