So you've made the decision to be more open about money matters with your child. Good for you! Whether or not you're entirely comfortable with this decision, you need to decide exactly what information you're going to share—and when. You don't have to share everything, and what you do share is dictated in part by the age of your child.
You'll want to consider two general areas when sharing information:
- The family's daily finances
- When a family crisis arises
After you see the kinds of information to be shared, you'll get some idea of when you should share it.
Piggybank on It
Consider having family conferences at Sunday dinner, or whenever else it's convenient. Usually these meetings are used to air grievances or discuss problems of family members. In any case, make sure that the topic of money is on the agenda.
Piggybank on It
As children get older, they also can be party to the budget. For example, a teenager can be given a clothing allowance for a season (for example, when starting school) or some other period. Then, it's up to him to decide when and how much to spend on a pair of jeans or new sneakers.
Growing up, I heard my father routinely say, “Turn off the lights when you leave a room; I don't own the electric company.” The message from my parent was clear: We didn't have money to waste. I, in turn, complained to my children each month that the phone bill was more than $100. It wasn't until after my daughter started to work that she understood what a $100 phone bill really meant—before that, I could have said the bill was more than $1,000 or more than $10, and these numbers wouldn't have meant anything to her other than the fact that her mother was angry.
The point of these stories is simple: If children are aware of family finances, they can better understand how to behave. This will cut out the need to nag and can make your children more responsible.
What information should be shared? Does your child have to know your annual salary, the dollar amount of the monthly mortgage payment, or the size of the family savings account? The answer is probably no—the numbers are meaningless because there's nothing to compare them to. You child doesn't know what his friend's parents earn or what their mortgage payments are.
What your child does need to know is where the family stands financially. This means telling a child certain things:
- Who makes money decisions in the family. Usually, parents work things out together and present a united front to children. But the days of “ask your mother” or “wait until your father gets home” are still common enough. Money decisions may still be made by the parent who earns more.
- How money-related decisions are made. Children want things now, but parents know they need to save for things later. There's always a tension between spending and saving.
- The family is on a budget. Children need to understand that in most households, money isn't an unlimited commodity. There's only so much to go around, so decisions need to be made on how to allocate the money that's available.
If your family is like most, money doesn't flow like the mighty Mississippi that can run forever. It's more like rainwater collected in a pail that can be ladled out as needed. Explain that if a cupful is taken for one thing, it's not there for something else.
Sticking to a budget means that there has to be give and take in deciding how the family's money will be spent. Some families are more willing than others to make sacrifices to accommodate a child's wants—just ask the parents of our Olympic hopefuls what they had to do without so that their children could pay for the costs of training.