My Money Is Your Money? – How To Talk About Your Finances With Your Kids

Would you like a budget with your burger? Copyright (c) 123RF Stock Photos

Talking with kids about their money is relatively easy. Talking with kids about your money is more challenging.

One issue is the obvious concern about where this information will end up. Will it be dissected on the playground? How much of it will be shared around other people’s dining tables?

But dig a little deeper and you’ll find the emotional reason why we parents hate to reveal too much about our finances:  the fear that our kids will feel we’ve failed them.

Take heart, there’s an opportunity here. As parents, you can teach valuable lessons by sharing details about your financial situation with your children.

But let’s look at what’s holding us back first.

Not Measuring Up

Unless you’re the richest family on the block, you’re going to come up against situations where your finances might not measure up against other families’ finances.

When T was in Kindergarten, we drove over to a new friend’s house. As we pulled into the long driveway, T was amazed. “Wow!” he said.  “Zoe has a really big house.” (She does. It’s an amazing house.)

That was the first time I faced the situation where T was aware that some people have more money than us. How did that make me feel?

Guilty that I hadn’t managed my money better earlier in my career. Embarrassed that T now realized that some children had it “better” than him. Vulnerable as now the bubble had burst and T had the first inkling that his parents were not all-powerful gods.

But I also realized that how I reacted would give T an important lesson on how he should feel about his friends sometimes having more than him, whether that was square footage, toys or electronics. So, I replied cheerfully, “It’s a great house, isn’t it? Let’s go check it out!” He tumbled out of the car, eager to explore and no more was said.

More recently, we’ve had to deal with T asking a friend about how her husband had acquired his wealth. He’s genuinely curious, rather than envious of their position. I’m grateful that he sees the differences as a motivating factor rather than something to complain about.

Failing As A Provider

The other side of feeling like we’ve failed comes when we have to explain that we don’t have enough money for something.

Almost from the moment of conception, parents are determined to provide the best for their child. Witness the ever growing number of baby-related items, from clothing to protective devices to educational toys. And that’s just for three month old infants. It’s a huge emotionally-driven market that’s attracting big brands and entrepreneurs.

As the your child grows, it’s tough to say that you can’t afford something. That you need to spend your money on other things. You feel guilty that you’re not providing them with what they want.

Let’s Talk About Money, Baby

What prompted this post was reading two articles this week that took different approaches to talking about money with kids.

Are You Talking with Your Family About Money? over at MoneyNing recommends having once-a-month family budget meetings. I really like the suggestion of providing the family with opportunities on deciding how to allocate money.  For example, let them know that there is a set amount for entertainment that month and ask them to decide whether they want to use that on going to see a movie or going out to dinner. That’s a great way to teach them to make choices within a budget.

The article also mentions talking about shared financial goals.  We’re saving up to go to Europe this year to see our family. It’s a big expense so we are letting the kids know that we’re cutting back in other areas to reach this goal. Amazingly, the boys offered to put some of their own money towards the trip.

You would, however, need to be quite disciplined to do all that the MoneyNing article advocates.  I fall more into the camp of “teachable moments” which is better matched by Spoil Your Kids with Love, Not Money on CNBC’s site.

The article covers eight common money mistakes that parents make.  I particularly love:

  • Too Quick To Help – parents need to stop jumping in to solve problems for their kids.  Give them the space to figure it out for themselves – they may surprise you.  Even better, they acquire additional independence and renewed self-confidence.
  • Catching Their Fall – I’m guilty of this one“Many parents try to micro-manage their kid’s piggy bank by not letting them spend the money they get for birthdays and holidays on trinkets at the toy store.” Let them stumble when they risk losing a few dollars and learn their lesson now rather than when the stakes are high.
  • Never Saying No – much to my kids’ chagrin, I’m actually quite good at this one.  This goes back to the fear that parents have of failing their kids.  What we need to remember is that we’re failing to prepare them for the real world – hard knocks and all – if we teach them that they will always get what they want when they want it.

How much do you talk about your money with your kids?  What do you share?

6 Responses to My Money Is Your Money? – How To Talk About Your Finances With Your Kids

  1. Really enjoyed reading this article. I kept nodding my head because I had literally had the same conversations and reactions from my kids over the years. Several years ago, my son had a friend that lived in a very nice, large home. When this friend came to our house to play, his comment was “Cool house” and he began to point out the things that he liked about our smaller home. It was really interesting that young kids don’t see all the glitz and glamour. He genuinely saw things that were different about our house that he liked. It was a great learning lesson for my son. He learned to be proud of his home and that real friends see past the material things. A great lesson for us all!

    • Suzanne says:

      I had a friend who had the reverse happen to her. Her son’s playmate came over and commented “Wow, your house is small.” My friend took it in her stride. Her rationalization was that it was good for this kid to see how people lived in different types of houses. There’s lessons to be learned in both directions.

  2. Julie Mozena says:

    I think you make some great points in this article about the emotional issues around family and finances, which is a big challenge for most everyone I think. I appreciate the ideas, esp. the family budget meeting – great idea!

    The challenge of having friends with “more” is a pretty recent one for us too. Our son’s best friend lives in a house that could fit 2 of ours…for a while he basically wanted to live there. He seems to be relaxing in that now, though, and I’m getting the sense that he’s feeling better about us as a family, no matter the size of the house or # of things we have. The fact that the parents are divorcing may also give him some food for thought, that lots of stuff does not alone a happy family make.

  3. Suzanne,

    Enjoyed your very thoughtful article on an emotion-laden topic. Seems like step 1 is for the parents to get comfortable with their own situation and feelings around money. That makes subsequent conversations with the kids much easier.

    I’ve always felt that how you handle your money should be an expression of your values, not just a function of how much money you have. Ideally, your values stay pretty constant, while your wealth may fluctuate quite a bit. So, I like to frame money conversations with my kids around values. One of my favorite role models in this area is the late Randy Pausch who talks about how what really matters is people, not things in his famous “Last Lecture”. Very inspirational to watch with kids and really puts a lot of money and possessions into perspective. His videos are archived here: http://www.cs.cmu.edu/~pausch/

    I love your mission. Keep up the good work!

    Regards,
    Bill

    • Suzanne says:

      Hi Bill,

      I’m a big fan of Randy Pausch too and have watched the lecture and read his book. (Wish I could be as good as he was about time management.) I think you’re spot on with the need to keep money closely linked to values when you are talking with your kids.

      Really appreciate your insight as I’ve been keeping an eye on FamZoo for a while and am really impressed with what you do.

      Suzanne

      • Awesome – Randy was an extraordinary person who left an indelible impression on so many.

        Thank you for the kind words about FamZoo. It’s neat to see more and more solutions in the online-personal-finance-for-kids space emerge – from Zefty, to Pam’s MoneyTrail to FamilyMint to ThreeJars to FamZoo – not to mention thoughtful content sites like your own.

        Collectively, I think we can all make a significant difference in the lives of future generations.

        Keep up the good work!

        Regards,
        Bill

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