Tax time a taxing time

It's tax time again. I've been gathering my receipts, documents and previous year's returns, sitting in front of the computer and repeatedly saying, "I don't know" whenever the TurboTax program asks me a question.

It's a reminder of how disorganized I feel this time of year even though I save all the documents I know I'll need.

It's also a reminder of how I need to teach my son about finances. It's a subject that was quickly mentioned in school when I was a kid. I think we learned how to write checks and then moved on to cooking class.

Many high school kids entering the world have no idea about the world of credit cards, mortgages, income vs. expenses, etc. Yet it is so very important for them to know. The reason so many banks are struggling right now is because of poor credit decisions (on their part as well as the part of the people they gave the credit cards and loans to).

Then there's the idea of running a business. I spent most of yesterday going over beginning and ending inventory for a business I no longer run (ended in 2008) but am still suffering the residual effects from. I never had any business training in high school or college and I found out the hard way that there's a lot more to it than great customer service.

As parents, we need to make sure our kids go out into the world with a solid understanding of finances and accounting. We don't want them ending up dirt broke, living paycheck to paycheck. Even people who make a lot of money can ruin their financial lives if they don't know what to do with it. Being successful in your career is only half of the equation. The other half is using that money wisely so you don't end up losing your shirt to creditors or losing your house to the mortgage companies.

I did some research and found a DVD that helps explain the basics of accounting. It's called Best Practice Institute's Accounting In An Hour - Get Smarter Faster DVD by Rick J. Makoujy, Jr.. High schoolers will definitely gain from this DVD that turns a sometimes dull topic into something they can enjoy and learn. It answers questions like: What is the difference between an income statement and a balance sheet? Why is budgeting so important? Why do some profitable companies run out of money? It is highly rated by those who have used it to get through a college course or those who simply needed to understand accounting.

For teaching the basics of investing and business to your high school children, there's an audiobook by Peter Lynch and John Rothchild called Learn to Earn: A Beginner's Guide to the Basics of Investing and Business. The authors state that the basics of investing are not taught in school and a failure to understand it can lead to tragic consequences. They cover the stock market as well as savings plans and 401(k).

For younger children, I found that simple finances can be taught with an allowance. My son was constantly asking me how much money he is owed from his allowance and we came up with a plan to let him know. He keeps a log of his chores and how much he gets paid for each chore. If he borrows money before "pay day" then we mark it off the log. There's also a great video on BrainPOP for younger kids about budgeting that helps explain income and expenses. (If you don't have an account, there's a free 5-day trial.)

Now that my son's a little older, I think I'm going to take his financial education a little further. One of the middle schools in the state had a lesson where the students started their own (fake) business. They had to decide what their business would be and work up financial plans to run it. They had to figure out how much the business was making and how much they needed to spend to keep it going. It was pretty basic, but taught the students a lot. They learned how to cut costs in order to stay in the black for one thing. And they also learned that it takes more to run a business than great customer service. That's information I could have used before I started my business.

If you have any other suggestions for teaching middle school students about accounting, budgeting and finances in general, I'd love to hear them.