Kids and Money: I want to give my kids a practical understanding of money, but I'm not sure how much I should tell them about our own situation. Do you find it wise to discuss your financial situation with your kids?

Absolutely!  ...Within certain boundaries.

You want your kids to be comfortable asking you about anything, so don't make money a taboo subject.  When they ask questions, let them know you are happy to answer.  Remember, you are the teacher, so don't be afraid to teach.  When they ask a question you are uncomfortable answering, redirect their focus towards a principal rather than a number.  If the questions is how much money does Daddy make, the answer could be exactly enough for our family or more than he did last year or not as much as we would like, and that is why he is going to school at night.  As children get older you will have to decide how much personal information you want to share with them.  There is no right or wrong answer here.

Children may not need to know how much is in your savings account or how much Daddy earns a year (although your older kids may be smart enough to figure it out themselves).  But they do need to know the cost (and value) of things.

Make sure your children know where money comes from.  When Daddy is gone from us all day, he is earning money so we can buy all the things we need.  You don't have to give specific amounts, but you do want them to see that Daddy (or whoever is working) earned that money for them.  Then when they beg for something  you can help them to see it's value compared to an actual day of work.  We could go to the movies, but Daddy would have to stay three hours later at work to earn money for that.  Help them to see that spending money means someone in the family has to be gone earning it.  This can help curb the gimmees.

Help children to compare the cost of similar things.  Let them see that a dinner out may cost ten times what a home cooked meal costs.  That doesn't mean you can't eat out, but you want them to know that there is a monetary difference.  Let's pretend your child is asking for ice-skating lessons, and let's say you can afford them.  Make a list of all the other things your child could have for that same amount of money.  Let them compare the value of skating lessons against the value of other things with a similar cost.  Your child may decide they still want the skating lessons or they may find that there are other things they would rather have.  This kind of thinking is good practice for later on when they'll have to make tough choices about where to live, where to go to college, what kind of car to buy, etc.

Also help them to see that saving money on one thing means that you have more to spend on something else.  If your family is saving up for something, help your kids to make the connection between the things you are giving up now and the thing you will get in the future.  Appreciation for the rewards of delayed gratification is a lesson that will last a lifetime.

There is a lot of great information you can give your kids depending on their age and your personal circumstances.  The most important thing to remember when talking to kids about money is to be positive.  You don't want your children stressed about family finances.  So don't talk about money from a standpoint of fear.  We don't have enough money.  We can't pay our bills.  Everything is too expensive.  These are all things you may be thinking, but if you say them in front of your kids you will give them the impression that you are a victim of your finances. You are not a victim, and neither are your kids.  If you want to teach your children to control their own finances, you must demonstrate that you are in control of your own money. 

I am waiting for a better price before I buy that.
We are saving our money to spend on something else.
I would like to buy that, but let's wait and see how we feel about it in a few days.
That toy does look very fun!  But today we are using our money to buy school clothes.
Mommy and Daddy are working together to find ways to earn enough money to pay all of our bills.
We don't have enough money today, but we are working on it.
Our family always has what is most important, so we don't need to worry about anything else.

There are a million everyday ways to bring your children into the conversation about your family's finances.  Just remember to keep it positive, and don't give them more information than they are ready to carry.


Marcia