You already know why you should have ongoing discussions about money with your child.
It teaches kids to be responsible with spending and saving.
They can learn from your mistakes.
It sets them on the path for financial success.
On the flip side, your kid doesn’t need to know everything you’re thinking, at all times, when it comes to finance. “There is no question that bombarding your kids with facts, feelings and information about money all at once, or too early, can be overwhelming for children,” says Jaclyn Weitzberg, CFP®, President of Money MindEd, a financial education company for parents and teens.
So what should you keep to yourself? Below, experts comment on when to stay mum … and when it’s appropriate to share.
1. What You Earn
The first time your kid asks how much you earn, you may freeze. Should you tell her? “It’s important to educate your kids about the different salary levels and career choices that can add to higher income, but I don’t believe it’s necessary for your kids to know exactly how much you’re earning,” says Weitzberg.
Why You Should Stay Mum: First, there’s no benefit from it, says Weitzberg, plus, depending on your child’s age, whatever number you name may make her think you’re rich. “Prior to working, kids often have difficulty wrapping their heads around dollar amounts that are out of their reach,” Weitzberg says. “One thousand dollars can seem like a fortune to them, so you can imagine what $35,000 or $100,000 might seem like,” she says. And, when kids think their parents have money to blow, they tend to ask for more (and more expensive) stuff. Then you’ll face the issue of saying no, which we talked about here.
What to Say Instead: Instead of saying, “I make [amount] each month,” or, “That’s not your business,” Betsy Brown Braun, author of “Just Tell Me What to Say: Sensible Tips and Scripts for Perplexed Parents”, suggests the following response: “I make enough money so that we can afford to pay all of our bills, pay for the car, and pay for …” This provides your child enough information to know you are able to take care of him–and you won’t have to worry about him spilling your financial business to his classmates. It’s also a good opportunity to present your values as a family: Explain the things that matter to you most—like healthy, home-cooked food and enjoying dinner together—and how money helps pay for them.
When to Tell the Truth: There’s no magical age to reveal your salary–it depends on your child’s maturity level and his motivation for knowing, Weitzberg says. Before sharing, ask yourself, “Why does he want to know?” “Once you’ve answered this question, use your best judgment to decide whether a specific number, an income range or just stories of how you started out and got to where you are today are most appropriate,” Weitzberg says.
2. How Much Debt You Have
“Discuss debt to the point where your kids have an understanding of what it is, but the amount that your family may be in debt is unnecessary to disclose,” says Ken Damato, founder and CEO of DoughMain, a family financial education website. A dollar amount can be alarming for kids, especially at a young age, he says.
Why You Should Stay Mum: Even if you don’t give an exact amount, if your child often hears you talking about how high your student loan debt is, how old you’ll be when you finally pay off your mortgage or how close you are to losing your home/car/whatever, it could make her feel insecure. Children need to feel like they are safe, and that parents will take care of them.
What to Say Instead: Rather than talking about how much debt your family has, Damato says it’s better to teach kids about debt in general, and ways to try to avoid or manage it. “First, explain exactly what debt is and how people find themselves in debt—like not paying off credit cards in full,” he said. “Then, explain that if you do find yourself in debt, it’s very important to work hard to pay it off immediately because the amount grows larger as interest is accrued.”
When to Tell the Truth: There’s never really a time when parents need to reveal their exact amount of debt to kids, says Damato, unless it’s of critical importance to the child (as in an adult child will soon be taking care of the parents financially).
3. What Your Family Has vs. Others
Yes, your kid will notice if the neighbor has a pool and you don’t, or that his cousins wear super expensive shoes that he doesn’t have, but there’s no reason for you to point out what your family has compared to others.
Why You Should Stay Mum: If your family is lucky enough to be able to afford lots of luxuries, your child may think your family is superior and start bragging. If your family has less, he may feel embarrassed, or may even get mad at you because you don’t earn more. Regardless of whether your family has more or less than others, comparisons make a child feel it’s important to keep up with (or beat) the Joneses. Kids who pick up this habit tend to have financial troubles as adults, Weitzberg says.
What to Say Instead: When your child starts asking why others have things that your family doesn’t, you don’t have to make excuses, or get offended. “What parents should say is, ‘every family has its own way of doing things,’” says Brown Braun. Then, you can explain: “We, as a family, don’t choose to spend our money that way. We’d rather save our money to go on a trip, or we’d rather use our money to buy special food for the family.” Keeping the conversation about your own household helps your child focus more on what your family is doing, and less on what someone else’s is.
When to Tell the Truth: There’s never really a need to compare your family to others–just keep the conversation about being thankful for what your own family has.
4. What Investing Is
Parents of young children should put this area of discussion on hold. Understanding how investing works can be confusing to some adults, so for children, it can be especially difficult (or impossible) to grasp.
Why You Should Stay Mum: If you start talking about stocks, bonds and mutual funds, your child may become overwhelmed and think dealing with money is hard (and boring).
What to Say Instead: “When educating your kids about finances, it’s important to build financial knowledge in steps,” says Weitzberg. She suggests parents start by talking about what money is and how it’s earned, then move to concepts like saving and budgeting, then credit and debt, and finally investing.
When to Tell the Truth: We have an age-by-age timeline for the money milestones you should teach your kids here, and we suggest an easy way to start introducing stock market concepts in the teen years, at around age 13.
5. Large Financial Losses
Although the reality is there will always be financial ups and downs, experts say too many (or large) losses shouldn’t be shared with children.
Why You Should Stay Mum: Remember, security and stability are essential to a child’s well-being, so if your child hears you just lost $5,000 in the stock market, or you make a comment like, “Well, there goes your college fund” after a loss, it can be worrisome for the child, Damato says.
What to Say Instead: When you need to tighten up the purse strings after a setback, there’s no need to alarm your child by telling her how much was lost. A simple explanation should work: “We’re trying to save a little more these days, so there will be less eating out and going to the movies.”
When to Tell the Truth: The only time parents should alert a child to a large financial loss is when the child is of working age and it’s of critical importance to him, Damato says. “For example, if the child will have to take out college loans because of the family’s financial loss, it becomes more important to discuss the issue with him, and then talk about the next steps the family needs to take,” he explained.