How Much Should Your Kids Know About Your Finances?
I know of parents who don’t ever discuss money with their kids. “They should be carefree at this age,” they claim. Money isn’t an appropriate topic for family conversation at these homes. But is this a cop-out for preparing kids for real life? And are they missing an opportunity to keep one another accountable to a single goal?
It took me many years for me to figure out that I was raised in a poorer home. I had everything I needed up to the age that I felt entitled to more. Junior high ski trips, basketball games, and county fairs alerted me to the fact that we just didn’t have the extra to spend like other families. My mother sat me down and explained to me how our budget worked – and also the very important lesson of “when we run out, we run out. We can’t buy anything else.” I helped her clip coupons, look for sales, and tried not to beg for stuff in the checkout aisle. I was nine at the time.
I now have my own 9-year-old (and a gaggle of toddlers), who come to me begging for everything under the sun. I have taken the time to explain the concepts of saving, spending, sharing, and investing. We have modest allowances for them. I let them clip coupons with me. But I have never, ever given them reason to worry.
Sharing finances with kids is a fine, scary line. In my opinion, it can’t be done too soon. Here are a few acceptable ways to keep kids in the loop, without giving them nightmares:
Give them an allowance. So many parents choose not to do this, and while I understand where they are coming from, I see benefits from it that I had never imagined. Holding a fistful of their own dollars gives you a way to communicate that just talking about it won’t provide. ( I have discussed the allowance practice in detail over at Parenting Squad.)
Help them to manage their own money. Today is a great time to teach about finance. There are more tools than you can shake a stick at, and most of them are very, very good. Even a laid-back parent, such as myself, can find the right program for the younger and older child alike.
Share your situation – in a general way. It’s OK to tell Tommy or Susie that there isn’t enough money this month for a new pair of Heelies or for the latest Wii game. It is also admirable to tell your kids, “Daddy or Mommy has to work 4 hours to make the money for dinner at Chuck E. Cheese. Would it be OK if we do something that costs less?” I’m not asking you to guilt your children by making them choose. I’m suggesting that you help them to understand where money comes from, the sacrifice that earning entails, and keep them balanced with their focus. Certainly there are parents that could take this to the extreme, asking kids if they want Daddy to work for their food, but that is ridiculous (and not at all what I’m detailing.)
Give them some credit. Kids are not stupid (about most things, anyway.) If you’ve been home looking through the Monster.com job listings for the past month, your kids probably know that you aren’t working. (The details are none of their concern, however.) If bill collectors are constantly calling your house, leaving messages, or sending bills, older children will take notice. Be as honest as you can about things without burdening them further. Use the situation as an opportunity to share what consequences are.
Give them opportunities to help. You don’t have to wait until you’re cash-strapped to enlist the assistance of the kids. Small things that will make them feel like they're helping include: letting them plan inexpensive meals, giving them coupons to cut, and taking them shopping. Just like adults, children feel less anxiety over a situation when there is something they can do. If you are in a situation where money is tight – and it’s obvious – kids can do well by lending a hand to the family cause.
Keep the lines of communication going (both ways.) Encourage kids to ask questions about money and the family budget. Regularly engage them in dialogue about money and what types of things are important for your family. Remember that each family will be unique in the priorities that they set, so don’t assume that they are learning this from their friends or teachers.
By not hiding money matters, you are equipping them to deal with the future. By doing it gently, and with age-appropriate experiences, they can learn to feel capable of managing money. Most kids will start to wonder why you are watering-down the milk, anyway. Wouldn’t you like them to learn something from it?
(For another great discussion from the other side of things, check out Sarah Winfrey’s excellent article, Mom and Dad, Your Financial Decisions Matter.)