FAMILY FINANCE: Understanding What Government Takes and Why
Episode 14: The Invisible Tax
Imagine earning £10 per hour, working a full day, and walking away with £7.80. Your child will live this moment. The question is whether they understand what happened or whether they simply feel robbed.
Tax is the invisible hand in every financial transaction your child will ever make. It is also one of the most avoided topics in family finance. Parents skip it. Schools ignore it. And so children become adults who feel cheated by a system they never understood.
Here is the truth your child needs to hear early: tax is not theft. It is a deal. You give a portion of what you earn, and your government uses it to build roads, fund schools, protect borders, and care for the elderly. Whether you agree with every line of that spending is a separate conversation entirely. But the mechanism is not sinister; it is a social agreement, and every earning adult is part of it.
The real problem is not that taxes exist. The problem is tax ignorance. People who do not understand how taxes work pay more than they should and miss legal opportunities to reduce what they owe.
There are two types of tax your child will eventually encounter. The first is automatic; income tax is deducted from a paycheck before the money is ever seen. The second is strategic, taxes that can be reduced through smart, intentional decisions. Saving into a tax-advantaged account instead of a regular one, for example, can mean keeping £20 more of every £100 earned. That difference, compounded over decades, is enormous.
The child who understands this does not just feel the system happening to them. They learn to move strategically within it. That shift, from victim to strategist, is worth more than any single tax saving.
This week’s challenge: The Payslip Breakdown
Sit with your child and go through a real or mock payslip line by line. Here is what came in, here is what came out, here is why, and here is what actually made it home. Make it concrete, make it real, and make it a conversation, not a lecture.
Dinner table question this week:
“If putting £100 into a special savings account instead of a regular one saved you £20 in taxes, would you do it? Why do you think most adults don’t?”
Understanding tax does not make you cynical. It makes you strategic.
See you next week
Dr. Mayowa Olusoji
The Money Smart Coach
