Very few things represent childhood to me more than Halloween. I mean what is better than dressing up as your favorite movie character or creating a spooky costume to run the neighborhood accumulating copious amounts of free candy! I remember fondly my peak years of making two trips around the neighborhood filling my pillowcase with goodies. At the end of the night I’d sit down with my siblings to count our loot and negotiate trades. Back then I’d be happy to pass off a Hershey’s bar or KitKat for some Dots, flavored Tootsie Rolls or gummy bears. Today it’s hard to beat a refrigerated Reese’s Cup or Mounds Bar. I get a sweet tooth just thinking about it!
Hopefully COVID didn’t put too much of a damper on Halloween plans this year. In our neighborhood we spread out candy on tables in the front yard to avoid communal bowls and limit face to face interactions. As a parent, it was a joy to watch the excitement of all the kids. My 3-year-was thrilled to be Queen Elsa from Disney’s Frozen and as you can see from the picture the rest of the family joined in the fun.
Of course, the financial advisor in me is always thinking about how to help people of all ages develop good financial habits. Halloween trick-or-treating provides several opportunities to teach kids about earning income, taxes, spending rates, and keeping your hard-earned stash safe! Here are some ideas and topics to address with the young people in your life in the aftermath of Halloween.
Earning “Income”
Most trick or treating aged kids don’t have jobs and might just be learning to understand the concept of money and earning an income. Therefore, the annual Halloween tradition provides a great opportunity to teach kids that their effort and actions are directly related to their ability to earn income. Taken a bit further you can talk to them about the need to plan ahead and take steps today to maximize earning potential in the future. A creative costume and a vivacious “Trick or Treat” at each door go a long way in getting that extra piece or two. Furthermore, a well-designed logistical plan of attack is key to a strong haul. Planning a pit stop to dump early returns and keep your bag from getting too heavy is a pro-move. The best trick or treaters figure out ways to extend the season beyond just Halloween night. COVID has put a damper on the “economy” this year, but usually retirement communities, community festivals and school parties provide several opportunities to “earn income” in advance of the big night. Bottom line – the harder you work, the more “candy” you can get. Few lessons are more important.
Taxes
The “Candy Tax” is something you may have heard of. I am excited to put this into practice with my own kids – although it will be a few years before it really hits home for them. Believe it or not, this goes beyond Mom and Dad just syphoning off some of the goodies for their own enjoyment. Here is a link to a Candy Tax Returns that kids can fill out to calculate their taxes. I’ve included a basic tax bracket chart below based on the age of the child. This can be adjusted according to your own preference for candy, or perhaps to make a political point during election season.
In my example, I start with a rather high rate – because I can’t have my 1 and 3-year old pounding Milky Ways and Snickers at will. The rate progresses higher as the kids get older and presumably “earn more”. For more advanced lessons, allow for a Standard Deduction where the child can remove 5% of candy off the top to avoid taxes on that portion. You can also encourage the Charitable Deduction – a piece shared means another piece not taxed.
Spending Rate
Many kids may be tempted to eat all their candy as quickly as possible. Like spending your cash too fast, this may feel good in the moment, but is a poor decision when you consider your long-term wellbeing. In the case of Halloween candy, you may end up with a bad stomachache. In real life you may not be able to retire on schedule, or you may find yourself back at work after years off. Encourage children to make a plan for the candy to last until the end of the year, or if you have a really strong year, through the long winter months and into Spring. Doing the math on how many pieces per day can be consumed to allow it to reach a certain future date is a good lesson.
Risk Management
Last but certainly not least, make sure to talk about the importance of protecting what is earned. Like a reliable custodian, financial advisor or bank it is important to find a safe place to store your “money”. In real life you must protect against scams, theft, fees and defaults. For the candy stash, pets, siblings, and the sun might be more important factors to consider.
I’ll leave you with a belated Happy Halloween from TAAG and The Raidt Family!
