This issue features two topical articles. The first on how to discuss the economic downturn with children. The second looks at the impact of the Earned Income Tax Credit.
Helping Children Understand Tough Times
The Dow Jones has shrunk by half. Unemployment is higher than it has been in over 25 years. Layoffs by the thousand are announced on almost a daily basis. It's impossible to avoid news of the current financial crisis, impossible to avoid talking about it in the most extreme terms. But how should you talk about it with your children? We asked for some advice from our resident parenting experts, Kimberly Martini-Carvell, MA, Senior Director of Family, Community and Clinical Programs at the Village, and Dr. Kyle Pruett, Clinical Professor of Child Psychiatry at Yale School of Medicine.
Martini-Carvell began by referring us to the American Academy of Pediatrics (AAP) which has posted a set of tips for talking with children about the current financial crisis on its website. (We've linked it below.) It is interesting that the AAP includes these tips with its advice for dealing with disasters. In other words, the financial crisis can be every bit as disruptive as a hurricane or a fire.
The AAP offers a few basic principles. Information and how it is communicated with children is critical. Just as with a graphic news item on war, relentless bad news about the economy will stress a young child. The AAP suggests limiting children's access to TV news reports. The American Psychological Association distinguishes between being open and straightforward with children, which is, of course, good, and "over burdening" them with bad news. Parents need to gauge what their children can handle.
The AAP also emphasizes that parents should be careful how they characterize the current crisis as it relates directly to their own family's situation. Parents should focus on what the family can do and is able to afford rather than on uncertainties such as a potential layoff and what that will mean to a child's college fund.
Parents should also make sure they talk to their children in age-appropriate ways. A parent can obviously talk in more depth with a teen ager, who is able to understand the complexities of the current financial situation, than a 6-year-old. For an overview of the childhood developmental stages, click here.
Finally, the AAP warns parents to watch for signs of stress in their children, advising "talk to your children's primary care clinician or other mental health professional as needed." At the Village we understand well the stress caused by financial concerns. Poverty and the stress it produces underlie most of the issues that our clients face. The Village's Academy for Successful Families, which provides integrated services that deal with a range of issues, includes the Family Economic Stability Program, designed specifically to help families improve their financial situations. The program helps families with taxes, provides financial literacy training, and helps individuals and families put themselves on solid financial footings.
While the AAP focuses on dealing with the stress of the current financial situation, several other sources, including the Toronto Star linked below, emphasize that the current financial downturn can also be seen as an opportunity to teach children good financial habits. In good times it is easy to put off teaching children about budgeting or charitable giving. With the financial news getting constant play, now is the time make sure that children understand why comparison shopping, for example, is important, or that financial considerations are linked and that one often has to make choices and how those choices are made. Parents can use the current news of the recession as a jumping off point for general discussions about money and how to handle it. These discussions will pay dividends later when children begin to handle their own finances.
All parents want to shield their children from bad news. But the current economic crisis is proving that's not always possible. As the crisis deepens and its impact widens, even parents not directly affected will need to help their children understand what is happening. Done correctly, this process will help children avoid stress and put things in perspective. It may even serve as an opportunity to teach critical life skills.
It's tax season. At the Village, our Family Economic Security program is especially busy at this time of year. Dozens of volunteer tax preparers provide free tax assistance to hundreds of residents of Hartford. Last year more than 500 of our clients received a combined total of $1.3 million in tax credits and refunds and saved approximately $54,000 in tax preparation fees thanks to the Village's Volunteer Income Tax Assistance (VITA) program.
VITA provides free tax preparation assistance to low- and moderate-income families with household incomes of less than $42,000. It operates at our Village South location, 331 Wethersfield Avenue in Hartford, on Mondays and Wednesdays from 5 p.m. until 8 p.m. and Saturdays from 9 a.m. until 1 p.m. The program also operates out of the South End Wellness Senior Center in Hartford. With just over a month to go until April 15, the Village's volunteers have already assisted in the completion of more than 200 tax returns.
As with most low-income tax assistance programs, a major focus of the Village's program is the earned income tax credit or EITC. You can read more about the EITC in the article from the St. Louis Dispatch that we have linked below, but basically it provides a refund to low-income workers. The credit encourages productivity by increasing up - to a point - as the tax payer earns more, before it begins to phase out.
The EITC has been around for a long time and politicians across the spectrum point to it as a bit of tax code that makes a difference in communities that most need it. But some are critical of the EITC, arguing that its impact is limited and that in tough times we need to take a hard look at such programs. From our vantage point at the Village, we know how important every dollar is to our clients' family budgets. Indeed, Bruce Meyer of the University of Chicago, cited by the St. Louis Dispatch notes, "The EITC lifts 3.7 million people above the poverty line."
A look at the impact of EITC in Connecticut is interesting. According to data published by the Brookings Institute, in 2007 more than 200,000 state tax filers were eligible for the credit, affecting almost 600,000 people in total. Of those filers, 76.5% had children. More than half, 54.4%, were white; the majority, 73.3%, spoke English at home. More than half, 52.4%, lived in rented homes. The age distribution of the tax payers was roughly even, with no one segment taking particular advantage of the credit. Surprisingly perhaps, only 21.9% of tax filers who were EITC eligible lived in households that received food stamps. While the majority of filers, 62.1%, worked in the private sector, 7.4% were in the military.
But most revealing are the income levels of Connecticut's EITC eligible tax filers. And here the impact of the credit can be seen clearly. At the bottom end, about 21% had adjusted gross incomes of less than $5,000. For fully 75%, it was less than $25,000. The range of credits was from under $500 to $3,000 or more. It isn't difficult to imagine the difference $3,000, say, would make to a family of four with an annual income of $25,000. That amounts to a 12% boost to the family budget and could easily be the difference between keeping and losing the family car, which in turn could be the difference between keeping and losing a job.
While the impact of the EITC is broad and its positive affects clear, the EITC offers another less obvious benefit. Justice Oliver Wendell Holmes once said that taxes are the price of a civilized society. Put another way, taxes are the price of admission to that society. The EITC brings low income workers into the tax system, encouraging them to move up the economic ladder until they are paying back more than they receive. Taxes, like a bank account or home purchase, put low-income workers into the economic mainstream, helping them become full citizens with a stake in society.
Families and Children in the News
Here are a few articles and opinion pieces that we at the Village found significant or interesting. Please note that by clicking the links below, you will leave our website. The Village for Families and Children takes no responsibility for the content or information contained on those sites, as we do not exercise editorial or other control over them.
American Academy of Pediatrics
"Talking to Kids About the Economy: Tips for Parents and Other Caregivers"
The Toronto Star's Parent Central.ca
"Talking to children about the economy," by Heather Lalley, Associated Press
New Haven Register, February 15, 2009
"Schools see spike in free lunches," by Brian McCready
St. Louis Post-Dispatch, February 24, 2009
"Popular tax credit faces challenge with economy, " by Adam Jadhav
Christian Science Monitor, March 2, 2009
"Instant tax 'refunds' come under fire," by Brendan Conway