Children are notorious for asking hard questions, and it can be difficult to give them honest, age-appropriate answers. Yes, it’s okay to give a watered-down answer from time-to-time, but how exactly should you respond when they ask about your finances?
In this blog, we’ll examine the importance of having money-related conversations and review the things that shouldn’t be shared with your kids. We’ll also offer advice on how to answer six tricky questions your children may ask about your money.
Why Talk About My Money at All?
“It’s rude to talk about money.”
“It’s none of your business.”
Many adults shut down financial conversations with their kids. Unfortunately, avoiding these teachable moments can cause more harm than good.
One major benefit to talking about your money is that it gives your children the opportunity to learn from your failures and successes.
“I’ve seen the same financial mistakes made by clients generation after generation,” explained Mitchell Kraus, certified financial planner and owner of Capital Intelligence Associates. “Because money is a taboo in our society, very few kids learn the lessons their parents have already lived through.”
Having open conversations about the family’s finances can make it easier for your children to talk about money when they’re older. There’s a high likelihood that your children will stigmatize financial discussions if the topic of money is shied away from at home. However, if your kids grow up listening to and participating in positive and productive financial conversations, they’ll likely be more comfortable discussing money and asking for financial help as adults.
Keeping Conversations Age-Appropriate
You can start teaching your children about money at a young age. As for specifics about your personal finances, it’s better to wait until your kids are older and asking more specific questions. Save the detailed money talks for teenagers, who have more emotional maturity to handle more difficult conversations than their younger siblings.
What Not to Share
While we do advocate for teaching your children about money starting at a young age, parents don’t have to share everything. Here are three situations where sharing your finances with your children would be inappropriate:
When Something Is Too Private
Did your debt problem start due to a vice that isn’t PG? Are your finances tied to adult-level drama that you don’t want your kids worrying about? Would you cringe if your unknowing child innocently blabbed about your money to others?
If the answer to any of the above is “yes,” don’t share it. Being open with your kids about finances doesn’t mean telling them absolutely everything.
When It Can Make Them Feel Guilty or Distressed
“You’re eating me out of house and home.”
“I work long hours so you can have nice things.”
“I don’t know how we’re going to afford this for you.”
Negative comments about how much your child’s necessities cost can hurt them in the long run. Even if you don’t intend to make them feel like a burden, hearing how expensive or difficult it can be to feed, clothe and raise your child can make them feel unnecessarily guilty and anxious.
In situations where you can’t afford to foot the bill, it’s better to avoid bringing up the emotional side when your little ones are within earshot. Instead, use these opportunities to teach them about budgeting and let them help solve the problem with you. For example, if you don’t have money for brand new clothes for the school year, share with them your budget and ask them to help pick out second-hand items to complete their back-to-school wardrobe.
When It Might Be Used Against You
We’ll be the first to admit it: kids can be difficult. Maybe you have a teenager going through a rebellious or argumentative phase, a younger kid without a filter, or children who are struggling to navigate their way through your divorce.
While exact scenarios can vary, there are times when relationships are strained, tensions are high, and private information can be weaponized. If you don’t feel confident that your child won’t use your financial situation against you in the future, it’s best to keep the sharing and specifics to a minimum.
Tricky Financial Questions Your Kids Might Ask
Children can be blunt and unpredictable. While we can’t predict every question they’ll ask about your money, we we’ve covered six tough topics below:
“Are you in debt?”
It can be incredibly difficult to discuss debt with other adults, let alone your own kids. However, using your own debts as an example may help your older children gain a better understanding of how personal finances work in the real world.
Of course, make sure to keep your conversations age-appropriate. You can share how your debt affects your budget and how it may limit your ability to reach your current goals, as well as how you fell into debt in the first place. Seeing real-life examples of how your debts affect you may help to discourage your children from going into debt when they get older.
“How much money do you make?”
If your elementary-age children are asking about how much you make, it’s unlikely that they are looking for a specific number. They may be trying to get general reassurance that the family is in an okay spot financially. On the other hand, they could be sneakily fishing to see if they can ask for that new bike or gaming system they want.
Additionally, younger kids don’t have a filter and tend to parrot the things they hear. If you share specific numbers, don’t be surprised when they blab to their friends and the entire neighborhood finds out how much you make.
In most cases, it’s best to respond to the “how big is your paycheck” question without using numbers. For example, you can share that you have enough to pay for the family’s necessities and an annual family vacation, but not enough to afford a lavish lifestyle.
If you have a college-bound teenager, they will need to know more specifics about your income and tax information when they fill out their FAFSA. Even if you’re not planning on helping financially, it’s important to share this information anyway; not doing so can jeopardize their ability to get certain types of financial aid.
“Who makes more money?”
If you and your partner are both working parents, your child might ask which of you earns the most. This isn’t something your children need to know, especially when they’re younger and still trying to get a grasp on how finances work. Besides, if they know that Mom makes more than Dad, your children might get into the habit of favoring one parent over the other and trying to get things out of the higher earner.
As your children grow older and learn more about jobs and paychecks, they’ll likely pick up on which parent has the bigger salary. Avoid conversations about who’s paycheck is superior, and instead focus on how each salary covers important parts of the family budget. For example, you can explain that Mom’s earnings cover the mortgage and insurance while Dad’s paycheck takes care of monthly groceries and necessities, transportation and entertainment.
“You’re paying for my college, right?”
College can be incredibly expensive. It’s important to be transparent with your child about how much you can contribute.
If your finances can’t quite cover ivy-league dreams, that doesn’t mean you can’t still be supportive. Encourage your high school-aged children to start saving for tuition early, explore their schooling and scholarship options, and help them weigh the risks and rewards of taking out student loans.
“When you die, do I get anything?”
Yes, this question is a bit morbid, but it’s important!
Most parents want to make sure their children are taken care of when they’re gone, but how much information is too much? If they know they’ll inherit something valuable when you’re gone, will that knowledge lead them to becoming lazy adults, waiting to live off of your earnings?
The answer can vary depending on many factors, including the age and health of the parents and the maturity level of the children. Jordan Grzesczyk, financial planner at Transverse Wealth Solutions, recommends involving adult-age children in estate conversations without focusing too much on dollar amounts.
“I believe it is incredibly important to talk about money with your kids,” he wrote, explaining that he sets up family meetings with his clients when helping them with their future plans. “By including children, we are able to prepare them for what lies ahead whether that be an inheritance, a specific structure of gifting, or better yet, to give them the peace of mind that their parents do have a plan for now and the future. These conversations are often focused on the structure of the parents financial life and less focused on the specific details. Instead of using exact dollar amounts, we will illustrate the structure of how the money will flow if something were to happen to the parents.”
If your younger child is asking about what happens if you die, they may simply be looking for some sense of security. Rather than focusing on inheritances and estates, let them know which family member or trusted adult will step in if a worst-case-scenario occurs.
“An emergency happened — are we poor now?”
Most parents try to shelter their children from “grown-up” things that could cause them unnecessary worry. However, some life changes are impossible to hide, such as divorces, job losses, serious illnesses, sudden deaths and natural disasters. These unexpected challenges often come with hefty price tags and require everyone — including the kids — to adjust to spending changes.
We recommend having a careful conversation with your kids when money is tight. Explain why the family needs to cut down on spending and what lifestyle changes the family may be making in order to reach your goals.
You can also ask your children for their help during these times of change. For example, if you’ll all be eating out less, ask them to help you brainstorm fun meals to try making at home as a family.
Prioritize Money Conversations With Your Kids
One of the best gifts you can give to your child is a solid financial education. Read more on teachable money moments below: