1/11/2013 2:45 PM ET|
What to tell your kids about money
Parents often shy away from the topic, but children need to learn financial basics. Experts offer their 2 cents on what youngsters need to know.
Parents are constantly fielding questions from their curious youngsters, many of which they can answer with ease: Why is the sky blue? Does Santa exist? Where did all the dinosaurs go? But the real challenge comes when kids start asking about the family's finances.
Part of the issue stems from parents who are reluctant to talk to their children about anything related to money. Most parents say it's easier to talk to their kids about drugs than about money, according to a 2012 survey published by T. Rowe Price. Those who do broach the subject have difficulty telling the truth: 77% said they're dishonest with their kids about money-related items, with 15% not telling the truth at least weekly.
Some parents may fear how their kids will handle what they say. Even answering a simple question, like "Are we rich or poor?" can have repercussions. Tell your children you're rich, and they'll think you can buy them anything they want. Tell them you're poor, and they may feel guilty about how much they ate for dinner.
Other parents may think money isn't fun to talk about with their kids. "When I would talk to my son about money, my stepmother would say, 'You're talking to him too much about money. Can't he just be a kid?'" says Alan Wolan, the author of "Moneyology," a book series for young children.
When he was growing up, Wolan says, his parents would go into another room and speak in hushed tones when they talked about the family's finances. Wolan, on the other hand, encourages his son to ask any money questions he has.
One question a child might ask a parent: "How much money do you make?" Brad Klontz, a clinical psychologist and director of research at H&R Block Dollars & Sense, which gives parents tips on how to talk to their children about money, says it's best not to divulge the exact amount -- unless you're comfortable with the entire world knowing how much you make. "Kids aren't good at keeping secrets," he says. You'll probably satisfy them by saying you make enough money to get by, since their curiosity likely derives from them wanting to know if the family is financially secure.
Jayne Pearl, co-author of "Kids, Wealth, and Consequences: Ensuring a Responsible Financial Future for the Next Generation," says some parents feel the need to shield their kids from the family's financial situation. "Some parents would never tell their kid anything negative. While that's understandable, because their instinct is to protect, I think that's a mistake," she says. "We should tell our kids the reality in bite-sized pieces."
Yet that reality may be a despairing one for the family if, say, a parent has lost a job or the family is so far behind in mortgage payments they have to give up their house. In those troubling times, full disclosure is probably not the best way to go, says Klontz. "Over-sharing can damage a young child's self-esteem," he says.
But not telling your children at least some of what's going on could scare your kids even more. Susan Beacham, the CEO and co-founder of Money Savvy Generation, a company that develops products to help parents and educators teach children to make good money choices, says kids will pick up on financial strain if their parents appear stressed or anxious.
Beacham says many parents try to mask financial problems because they don't want to appear to have failed in the eyes of their children. Adults also may carry shame related to the loss of a job or piles of unpaid bills, she says, and they want to preserve their image as perfect parents.
But parents may do more damage if their children stumble onto what's going on, possibly by overhearing a conversation. To minimize the damage, couples can sit down together to determine the best way to break the news. "You don't want to shoot from the hip," Pearl says. She adds that it's important to be on the same page as your spouse so that the message you deliver is consistent.
When money is tight, putting a positive spin on the situation may be the best way to talk to your children, says Jaclyn Weitzberg, the president of Money MindEd, a financial-education company for parents and teens. Says Weitzberg: "Use any situation as a way to teach your children how to manage money more responsibly."
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