Do you talk to your kids about your money situation? If you don’t, you’re probably not alone.
In fact, an exclusive FinanceBuzz survey of 1,000 Americans found that many people don't think parents should share personal financial info with their children. Seventy percent say parents shouldn't share personal financial details with kids 14 and younger, and another 14% say parents should never share this info with kids.
But is this approach best? Or should parents break through this money taboo and start sharing info about their salary, savings, and debt?
Let’s take a look at the situation and how you might be able to share information without going too deep into details.
The case against sharing
Sharing personal finance details is difficult for Americans.The FinanceBuzz study also found Americans are reluctant to share personal financial details with their close friends, co-workers, and romantic partners.
It’s probably not surprising that parents don’t want to talk to their children about money, either.
Many parents have two main reasons for not wanting to share their salaries with their children, according to Kyle Boze, who teaches business and financial literacy at a high school in Ohio.
“Parents worry that their children might judge them or compare them to other parents,” Boze says. “Sometimes they just don’t want their kids to know.”
At times, parents worry that making a lot can be as concerning as sharing how little they make. In other cases, if parents are concerned about having a lower income, they don’t want to share their money worries with their kids.
Debt is another issue that many parents are especially reluctant to talk about, according to Jessica Grande, a senior client advisor at Levatus Wealth Services.
“Parents may not want to be embarrassed and feel like they’re letting their children down,” says Grande. “People tend to judge those in debt and with lower salaries poorly.”
When combined with a low income, concerns about debt can weigh on children and cause them anxiety. Kids often make assumptions about how the world works based on what they see around them. When you share information about financial difficulties and debt, you might worry that it will negatively influence them and impact their psychology.
However, when done appropriately, sharing information about your finances can actually help your children develop healthy attitudes about money.
The case for sharing
“A lot of the things our kids need to know are great lessons, and usually in areas we have struggled with ourselves,” says Boze. “The more things you don’t share, the less empowered your kids will be.”
Boze doesn’t advocate laying it all out there at once, and he points out that sharing needs to be done in an age-appropriate manner. However, the reality, he says, is that your own struggles can be used to illustrate financial lessons for your kids. If you can talk about your mistakes, you can help your children overcome or avoid making the same mistakes.
Likewise, it can benefit your kids to talk about your successes.
“If parents have a large salary, they may not want their children to think there will be a free ride in the future,” says Grande.
Even though you might not want to raise unfounded expectations for your children, you can still provide guidance and share what’s worked for you as you’ve established good financial habits.
While financial literacy classes at school can help, there’s no guarantee that your children will have access to a dedicated course on financial concepts. Boze administers a pre-assessment to his own students at the beginning of the term, with questions about mortgages, retirement plans, and what to expect in terms of loans.
He says that out of 400 points available on the pre-assessment, the average score is usually below 15. Parents aren’t talking about financial concepts at home, and it shows. A class like Boze’s can help remedy some of those issues, but he points out that consistency at home and at school is important.
“Not every school offers financial literacy classes, and even if they did, they might not be enough,” says Boze. “Without your guidance, your youth could learn the hard way how to manage money — and end up in a big hole.”
How to share money matters with your kids
If you decide it’s a good idea for you to share with your kids, the key is approaching finances in an age-appropriate way.
“Start with big-picture items,” says Grande. “Parents need to remember that learning about money is a life-long process that should start early to build a strong foundation.”
For young kids, it’s not necessary to go into details about your financial situation. However, you can talk to your children about the importance of managing money and how you make decisions based on your values and what matters as well as that sometimes we focus on different expenses. Providing them with physical money so they can practice — and talking about their purchases — can help them learn practical lessons.
As kids get older, you might need to address some stickier issues. However, kids often pick up on things, so being honest about how you’re working on earning more money or how you have to prioritize different things right now can make a lot of sense.
Older kids, especially teenagers, can be a little more involved in your situation.
“Anytime you can find a way to introduce them to major purchasing decisions that your household is undergoing, the more they are aware,” says Boze. “It can be as simple as showing them the interest rate on a new car you’re considering and how that adds to the sticker price.”
If you have investments or a retirement plan, Boze suggests showing them how you’ve benefited from putting your money to work for you. It’s important to show the costs of debt, but you also don’t want to neglect concepts like investing.
You don’t need to be specific and share every little detail, but if you can provide some practical examples of the way your choices have impacted you, it can give your kids a frame of reference.
Don’t forget to talk about financial expectations
Grande also thinks it’s important to talk to your children about what they can expect from you in terms of help with their own situation.
“Do you have money to pay for college?” Grande says. “What will your kids be responsible for and what will you pay for? You have to establish that early on.”
She also suggests talking to your children about what they can expect for allowance, as well as whether you expect them to get a part-time job during high school.
In the end, though, it’s mostly about getting past the taboo to help your children learn concepts about money. Having a talk with them about how a debit card works one day and then another talk about mutual funds on a different day isn’t going to turn your children into financially savvy adults.
Instead, says Grande, it’s important to begin with simple money topics when kids are young and then continue talking about money and sharing practical examples as they get older.
“The key is consistency and modeling,” she says.
FinanceBuzz ran this survey through Pollfish, collecting 1,000 responses from online users in the U.S. on June 3, 2019.