Financial Literacy: It's Tax (Refund) Season! How Do 401ks, RRSPS, and IRAs Work?

Help your high-school students gain real-life financial literacy skills!

This guided lesson includes:

- Information about registered retirement accounts (RRSPs) in Canada and 401ks and IRAs in the USA in simple, easy-to-understand language

- An example of how to calculate tax savings when investing in registered accounts in countries that use progressive tax rates

- Four scenarios of increasing difficulty for students to work on independently or in pairs (answer key included)

- Follow-up written questions to help students think more deeply about the pros and cons of registered savings accounts

Grades: This lesson is appropriate for high school classes, life skills classes, and adult education. It requires students to have an understanding of percent written in decimal form. For example, finding 26% of $12,000 by multiplying 12,000 by 0.26

How to Use:

Use the first page as a lesson for your students. Teach them about registered accounts in Canada and the US, why the government encourages them, and what benefits they have. This is where you can introduce the idea of tax refunds. People pay income taxes all year based on their earnings, but if they can reduce their income through deductions (for example by investing in a registered account) they will get some of that tax money they already paid back. Also introduce the idea of progressive taxes and how you pay more tax on the top end of your income.

Go through the sample problem step-by-step on your whiteboard to ensure students understand all the calculations required to determine how much gross tax and net tax a person pays.

Once students feel comfortable, let them work on the sample problems independently or in small groups.

If you are looking for more tax information check out this lesson: Income Tax: Notes & Realistic Sample Practice

A total of 6 pages in PDF Format

Title Page

Background Info and Sample Problem

2 Pages of questions

1 page reflection

Answer key