You are broke. You can barely afford to buy groceries for the week. The car broke down and you had to spend $875.00 to fix it, which means you do not have the money to send your child to camp. Should you tell the kids about it? Does discussing financial problems with your kids help them in any way, or does it somehow set the stage for financial instability of their own, as they get older?
According to experts, there are two very different viewpoints when it comes to discussing money with kids. Some believe that constantly worrying about money (and who nowadays doesn’t do this) and talking negatively about financial matters in front of the kids passes down a learnt habit of mistrust for money. In other words, if you are constantly nagging about money and talking about a lack thereof, children who don’t really understand the full circle of fiscal matters will grow up with negative associations towards money. Other experts believe that children, as members of the family – should be told about money problems and should be empowered to respect money, hard work – and even be included in efforts that the family makes to save money. In fact, having an open dialogue about money – when done without constant negative undertones can actually empower children with a respect for the cause and effect of hard work and money gained.
The reality of course is that whether we consciously talk to our kids about money or not – they hear our worries even if they are unspoken. When your child reaches late elementary school, they start seeing the differences between the kids that have a lot, and those that have less and they also realize where they stand in the equation. If your child is a have less child, then he or she may push the envelope, ask for extravagance, or even wonder why so and so at school wears brand name shoes and has such a big house compared to their middle class home? And parents need to be honest.
The worst thing that parents can do is hide financial problems from their child by always saying yes, and by over extending themselves so that their child can keep up with the Joneses. This does little to teach children gratitude, or to make them respectful of the things that they have and the payoffs of hard work. Plus, it sets them up for an adult life that will be quite disappointing when they find out just how difficult it is to acquire the things that they want in life.
The best thing parents can do is explain to children, in an age appropriate manner – how money works. For instance if your child wants a $100 pair of shoes – explain to them how many hours it takes mom and dad to work for that money to pay for them? Are those shoes worth 5 -8 hours of work? Ask them if they would be willing to work for 8 hours just to have that one pair of shoes. You should also make sure that your children have money of their own to manage. Rather than take your child school clothes shopping, give them each a certain amount of money to spend on the things they need and allow them to make choices. That way when they see the $100 pair of shoes, as opposed to the 6 outfits they can buy with that same amount of money, they will learn about the true power of the dollar. They will also learn that there are some things in life that they just cannot afford, and may decide to start saving.
Obviously, the last thing a parent wants to do is make a child feel insecure in their life. Sometimes when a child hears a parent talk about ‘being broke,’ their young minds jump to conclusions that may not be true. They may start worrying that they are going to be homeless or not have a pair of shoes to wear to school. So if you do talk money with your kids – be clear. If you have weeks that are short on cash, or have big expenditures that drain the bank account – tell the kids plainly, what happened and why, so that they understand what is going on. There is absolutely nothing wrong with kids knowing that parents need to be careful with money because this teaches kids to appreciate what they do have. But scaring a child does nothing but pass down a mentality of money insecurity.
In life, money is important. It is certainly not the most important thing in life. But it does play a major role in how we feel about success. Kids should learn to have a respectful relationship with money, which comes from an open dialogue at home. Yes, some things are certainly none of your child’s business. But hiding money matters from kids does very little to teach them about the money either. Strike a balance, and always make sure that you are communicating with your child on an age appropriate level. Be truthful so that your child feels secure in their life, and so that they grow up with an appreciation and a trust for financial matters.