Money is a source of mystery to children. They sense its power, so they ask questions, lots of them, over many years. Why isn’t our house as big as my friend’s? Why didn’t you give money to the man who asked you for some? Why won’t you get me the toy I want? (It’s only $400) Are we poor? How much money do you have?
We adults, however, tend to do a miserable job of answering. We push our children’s money questions aside, sometimes telling them that their queries are impolite, or perhaps worrying that they will call out our own financial errors. Sometimes we respond defensively, barking back, “None of your business,” unintentionally teaching our children that the topic is off limits despite its obvious importance. Others want to protect their children from a topic many of us find stressful, Can we keep them innocent of all of this money stuff for just a little bit longer?
That’s how kids come out of college $100,000 in debt with an English degree, Or not knowing how and why to start saving right away for retirement, or how to pick a health insurance plan.
Your children deserve to know what you make. It may sound improbable, but you can begin to initiate them when they are as young as 5 or 6, building their knowledge slowly and giving them the real answer while they’re still teenagers, it will be one of the most valuable lessons of their childhood.
Here are 10 major reasons why you should tell your children how much you make:
- Removes the mystery surrounding the topic of money.
- Makes it easier for kids to ask questions and make smart money choices.
- Helps facing the outsize college tuitions they will encounter while still in high school.
- Help kids plan their life accordingly and with more anticipation.
- Understand the need to be independent.
- Provides them with a healthier financial barometer overall, which would be useful when they start being pounded with credit card pre-approval letters out of the blue.
- As a child, it can be a handicap, but as an adult, it can be massively stressful to not know how much money you need to be making to be able to run a household.
- Reinforces that saving is something everyone should be doing no matter what their income.
- Helps reassure the kids that parents are making and saving enough to retire.
- Gives passive reinforcement in knowing that other people are also budgeting [despite whatever they make].
Here is a testimonial of a young woman who explains how knowing how much her parents earned helped her to be financially successful.
“I really can’t understand the mentality of hiding financial information from your kids. I learned about budgeting and how to allocate your money at the same time I learned about what money was; the two concepts were inseparable for me. My parents always shared their thought processes when they would decide to spend money on things. They showed me how they were saving for retirement, and what things they were considering when deciding how much to save.
We would often have family budget meetings, where we could all make our cases as to why we should spend more on one thing than another. Of course, my parents always had the final say, but they would listen to me and explain why they made the decisions they did (sorry, your sister’s braces are a higher priority than your PowerWheel car).
Because of this early exposure, I never had the same financial problems my friends did, even when I was a very poor student and recent graduate. I never accumulated credit card debt, nor did I buy a car that was too expensive for my budget. I always saved for retirement, starting with my first job. Budgeting and money management is just second nature to me.
I can’t think of a single argument as to why you would want to hide this valuable learning experience from your kids.”
Would you feel comfortable sharing your salary with your children? How do you discuss financial matters with your kids? Share your comments below or on our Facebook page.