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Financial Tip

Oliver Wendell Holmes, former Justice of the United States Supreme Court, once said, "Taxes are what we pay for a civilized society." Although people work hard to meet their needs and the needs of their families, there are some things they cannot purchase themselves. For example, the taxes paid to state and local jurisdictions help pay for police and fire protection. These taxes also pay for the operation of the local governments, and for local recreation areas such as parks and other public facilities.

On the national level, federal income taxes help pay for defense for the country. They also pay for capital facilities such as highways and other transportation services, and to help those who are poor or ill. These are all services that individual citizens cannot purchase the way they can buy food and clothing and the other necessities of life. When people live together in a society, all of its citizens bear the cost of providing such services. Taxes are the means by which the society raises the money to cover these public costs.

The United States Department of the Treasury has a number of fact sheets that can help people better understand the various taxes imposed in the United States. These include: Economics of Taxation explains how taxes support government services and benefit the country's citizens. Writing and Enacting Tax Legislation explains the process for developing and passing legislation into law.

In addition, Lesson 1.5 of the Yes, You Can Curriculum includes classroom examples of how taxes are collected and used by the various jurisdictions.

Source: Adapted from United States Department of the Treasury.

What's the Big Deal about Tiny Houses?

Can you live large in a very small house? The answer for a growing number of people, mostly Millennials, those born between 1982 and 1994, is an enthusiastic "Yes!"

It's a budding trend dubbed micro-housing, which refers to living quarters averaging 200 to 400 square feet and not more than 600 square feet. The movement can be traced back to the year 2000 when a California company, Tumbleweed Tiny House Co., began designing and selling tiny RV houses. They put a whole different spin on the term "cottage industry."

Save big money in a tiny house
For millennials who have delayed home purchases, the biggest benefit of micro-housing by far is the money they save. Instead of taking on a large mortgage, they can direct their earnings toward paying off student loans, saving for a down payment, contributing to a retirement plan - or just enjoying life without the responsibility of maintaining a larger home.

Jeremy Luther and Kendall Quack, members of Tiny House Collective Kansas City, have discovered the benefits of independent living in a tiny home and appreciate a less fettered life. "It gives us the freedom and mobility - amidst rent and student loans - to travel around and not be yoked to a job," Jeremy said in a June 7 Kansas City Star article.

Tiny house owners also appreciate that their eco-friendly lifestyle dramatically reduces their carbon footprint by requiring fewer building materials and less energy usage for heating and cooling. Additionally, not having a big lawn to mow also reduces fuel and water usage.

Learn more before you build
If you're planning to buy or build a tiny house, first check local ordinances. Cities often require a minimum amount of space to qualify the home as livable - unless the home is on wheels.

Some communities are now setting aside areas with lots for tiny houses. In Kansas City a 12-unit tiny house village is planned that will include a common building with a shared laundry room and large kitchen.

For those with an itch to build their own tiny home, plans are available online, and some builders and nonprofit groups offer workshops.

Here are resources for additional information:

Not sure? A startup company, Getaway, gives people the opportunity to vacation in a tiny mobile cabin as a way to literally test drive the concept. The Massachusetts-based company grew out of the Millennial Housing Lab at Harvard University.

Micro apartments are on the rise
Tiny apartments are also part of the micro-housing trend. Of course New York City has always been famous for apartments the size of a walk-in closet. But now other U.S. cities from coast-to-coast are experimenting with offering more sustainable living arrangements that still include amenities for comfort and convenience.

Micro apartments appeal to millennials who want the excitement of urban living without the high cost. Jonathan Eakes, 25, realizes the trade-offs he's making in his tiny North Carolina studio. "But whenever I get paid, I remind myself that I have money left over to do what I want - like going out and going on trips," he says in a Feb. 28 Wall Street Journal article.

Whether the choice is a tiny house or tiny apartment, small can be beautiful - and save a pretty penny, too.

Teachable Moments

Examining the size of your current home with your kids will allow you to discuss the "cost of living quarters." Have them measure and total the square footage of their room, the bathroom and kitchen. Then ask:

  • How does the total compare to the size of a tiny house?
  • What are the "opportunity costs" of saving on micro-housing? For example, they could build an emergency fund, pay off debts or afford to spend more on experiences such as travel.
  • Share the amount you pay monthly in rent or mortgage and have them calculate the cost-per-square-foot of your home.

Based on the size of their room, what's the value per month of that space?