This post contains affiliate links, see my Disclosure Policy.
Just this morning over breakfast my husband, Alan, and I were discussing our finances when all of a sudden our eight year-old asked: “How much have you saved in my college account?”
The room fell silent for a second or two as Alan and I came to terms with how to answer this. I had a whirl of emotions and thoughts come to mind such as: “I can’t tell you that or you’ll never appreciate saving for college on your own.” and “If I tell her that figure then she’ll tell her friends and then her friends will tell their parents, and….”. I also thought about the fact that many kids don’t have a dime in their name towards college and I don’t want my child to develop a sense of entitlement, no matter how small an amount we currently have saved.
In the end I decided to be honest, but not give all the info away and then use the age-old parenting trick of changing the topic.
So I said: “We have some saved. What else do you want to eat for breakfast?”
Such a lame response and I know I can and should do better.
You see, if there’s one thing I’ve learned from researching kids and money, it’s that parents who talk openly to their kids about money and finances help them grow up to be money-savvy adults.
And yet, this topic feels so uncomfortable for the majority of parents regardless of their financial standing. If we have too little money, the tendency is to shield our kids from this knowledge and if we have a lot, the tendency is not to reveal this to our kids so they don’t grow up complacent and spoiled.
But no matter what our financial situation, kids can learn a lot from conversations with their parents about money. A family’s personal finances are as close to a real-life learning environment our kids will get other than their own trials and successes with money in adulthood.
A recent T. Rowe Price survey found that kids whose parents frequently talk to them about money, compared with those whose parents do not frequently discuss money with them, are more likely to:
- feel knowledgeable about personal finance (46% vs. 14%)
- feel knowledgeable about investing (33% vs. 8%)
- feel like they understand the value of a dollar (92% vs. 84%)
I’d say that’s good evidence that being open about money, no matter how uncomfortable it is for us, can be beneficial for our kids.
And in case you’re wondering, there’s only a small chance your kids will learn about personal finance outside the home. According to the Council for Economic Education, only 19 states in the United States require a class in personal finance be offered in schools and only 17 states require that high school students take a class in personal finance.
Consider this as well: children are naturally curious, it’s how they learn. So if they don’t get a straight answer from you or can tell that you’re lying about the family finances, they’re most likely going to try to find out on their own. For example, a question such as: “How much money do you make?” if pushed aside or lied about could lead to an older child turning to Google or Salary.com for an answer – that’s either accurate or not at all.
If all this money talk still sounds uncomfortable to you, or even if it doesn’t, Ron Lieber in “The Opposite of Spoiled” has some good advice on how to answer any question about money. When his daughter asks him a question about money he simply asks back: “Why do you ask?”
This response invites the child to tell you why they’re curious and reveals that perhaps they’re just afraid that the family doesn’t have enough or are trying to figure out why a friend’s home is bigger than the one you live in, for example. These questions aren’t necessarily about money itself but about your child’s security or place in the world.
Are you able to talk to your kids about money? As you can see from the beginning of this article, we’re still not perfect, especially with questions that take us off guard! But every day I’m trying my best to find opportunities to discuss money, spending, saving, and being charitable with my kids. It’s not always easy, but I hope it will be worth it in the long run.
You May Also Like: