When my husband lost his job two years ago, our financial situation and lifestyle changed from "comfortably frugal" to "broke and stressed." As a stay-at-home mom, my husband's income entirely supported our family. Overnight we had to make drastic changes, including the way we talked to our kids about money. Up until then we'd been fortunate to have enough disposable income to travel, eat out and buy small "just because" gifts for the kids. His job loss meant the loss of those financial luxuries, and our children noticed.
With our kids, eight-year-old Isaac and five-year-old Gillian, we're open about our financial situation, but only in very broad strokes. While we never discuss specific dollar amounts or log into our online banking accounts to show them our credit card and bank balances, we do talk about the value of working hard for an income, saving for big purchases, why we need to pay taxes, the concept of borrowing money and why you have to pay interest on loans.
Our discussions around saving for the future include talking about RRSPs and RESPs, even though my son's more focused on shorter-term saving for his next Lego set. When we talk about taxes, we talk about what taxes pay for; when we talk about borrowing and interest, we talk about why it's risky for banks to loan out large amounts of money, using our mortgage as an example.
We prefer this conservative approach because we feel that talking about earnings, taxes, borrowing, savings and interest are building blocks in their financial education. At this stage, we use their birthday money and chore money as examples (and yes, we charge them interest on money they borrow from us to buy a coveted toy!). However, we prefer to skip the talk about personal salaries and debt: we don't want them sharing our financial information with their friends.
The decision to share detailed financial information with your kids is a personal one, and when I asked a few of my friends just how detailed their discussions got, the answers varied widely. Like me, most avoid talking specific dollar amounts:
"My 13-year-old daughter did a school project on how much it costs to have her. We discussed the dollar amounts of all our bills. It was fun, actually, because conversations like this happened: 'Well, you don't eat meat, so your portion of the grocery bill should be a bit less, but you do like cheese and that's expensive, so maybe that evens it back out.' We talk openly about money all the time." —Kelly W.
"I think there are ways of passing along sound financial principals without getting into the details. For example, you can discuss the fact that choices/sacrifices need to be made. Treats are not necessities. Avoiding unnecessary waste. We may discuss the cost of an extracurricular activity and how we might share in the expense to make it happen. They participate in grocery shopping and make good economical selections by looking for deals. Given their ages (15 and 18), we have asked my oldest to start paying for his cell and contributing to his car insurance. I do not, however, give them specifics on my salary. And, first and foremost, I do not think it should fall on their shoulders to worry about finances if we are tight. I want them to have a sense of security. There is plenty of time for them to worry about that stuff later." —Chantal M.
"I don't think my four- and six-year-old sons are at the stage where they really know the difference between $500 and $5,000, so we're not at the point where we have them look at bank statements. I was recently talking to my oldest about the difference between buying a house and renting a house. I worry that I'm stressing them out by insisting that everything be on sale before I'll buy it." —Beth G.
"I continue to show my nine-year-old and 14-year-old sons our monthly budget, which shows specific amounts. My youngest wanted to start karate last month and register for baseball. When we went over the budget he decided that karate could wait until fall. I didn't have to say no to two sports." —Michelle B.
Isaac and Gillian do have a concept of how much it costs to run a household. It's not uncommon for them to exclaim, "Wow, we spent a lot today!" when we're at the checkout at the grocery store—seeing a number surpass $100 seems excessive to them, even when it's a normal grocery bill for us. Am I ready to share more specifics with them? Well, since my kids also still think houses cost a googleplex of dollars and still believe that Santa brought all their toys at Christmas, I think I'll wait a few more years until their math skills are stronger and they're earning their own money. In the meantime, we're teaching them the basics.
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