Today’s guest post comes from Kate Nesi who writes about how to be open with your children about money. And this is a topic near and dear to my heart.
Like most, my parents were very secretive about their finances. I didn’t like it at all. For example, I had no idea what a good salary was or how much the mortgage cost.
I’m the opposite with my children. I tell them everything; they even know what our net worth is. The older one was blown away when I told her. The younger one? Here you go:
Take it away Kate!
It appears that talking about personal finance is still a taboo subject. I would venture to say that’s why we flock to blogs that openly discuss financial numbers, since it’s something we’re not getting in our daily discussions with friends and family. I’ve approached these conversations with them, but it typically gets awkward and they walk away. Isn’t frugal living and financial independence a passion of everybody’s?
One area I find compelling is how little we share our finances among our immediate families. Not only do many hide their expenses from their spouses, but many parents tend to completely shy away from any discussion of finances with their children. Parents want to give to their children without the concept of explaining where money is coming from, or even worse, going into debt to make their children happy.
A coworker of mine recently told me that she and her husband couldn’t fathom telling their kids that their annual Disney World vacation wasn’t going to happen. Instead, they put it on their credit card to pay another day as in years past. This way, their kids could have that experience and wouldn’t know that their parents faced serious financial straits and mountains of debt. But hey, the kids will always remember Disney when they foreclose on their house, right?
My husband Chris, and I were fortunate to have had gone through one of two major financial breakdowns at the time our oldest son, Monkey, was born in 2012. At that time, we could easily open up about our monetary issues, goals, and needs right in front of him and work through it openly.
Now that we have two children (Monkey is 5 and Crab is 2), we are very open about discussing finances and how we choose to spend our money. We discuss our budgets, dreams, and goals right along with our children and include them in the process.
What age is best?
I feel that there isn’t too early of a time to be open with your children about financial needs, goals, or why you live a certain way. Obviously, they’ll be able to learn different concepts at varying ages, but share what is appropriate for their level of understanding.
Where does money come from?
Monkey used to be babysat by a family friend that seemingly had an endless supply of money in retirement. This friend would take go to an ATM to take out cash on a regular basis, then take Monkey to a store to use the cash for whatever toy he asked for. She spoiled him, but in the end, it helped us teach him a good lesson about money.
Monkey believed that you just rolled up to an ATM and cash came out, not understanding that the money had to come in from somewhere in the first place. Through our conversations about those events, he learned that we go to work to make money, which enters a bank, from which we can withdraw cash or pay bills. It just doesn’t appear out of machines. All of this at the tender age of 4.
Talk Regularly about Money
While we openly talk about investing or other goals in front of our children, I know that they don’t fully comprehend compound interest or other levels of financial speak. Heck, sometimes even Chris doesn’t.
What we strive to do is not make it a boring or stressful activity, but an active part of our lifestyle and conversations. Not being open about money is a huge barrier to trust and wellness within a marriage, and that’s one thing we want to help our children learn about.
In addition, when you have open and honest conversations about money removing arguments from the equation it opens the opportunity to talk about future dreams and to grow together as a family. If Chris and I had to save our conversations for when the children weren’t around, we’d probably discuss money about 2 times per year!
Manage Your Bills/Income in Front of Them
I openly work on our financial spreadsheets and manage our bills when our children are awake. Bills are not hidden away for another day or when they go to bed.
While I’m entering expenses or making transfers to savings, Monkey usually asks to see the numbers. I show him what we’re working with, where the money goes, and then the number that is left. It’s no secret that I use software to organize our finances and he’ll eventually learn how to do the same for himself.
Highlight Your Good Habits
Our children are well aware that we make lists for food shopping, clothes purchases and wish lists for bigger items or fun gift ideas. They both have a wish list that they regularly add to and remove items from. This way, they are able to get the “item” off their minds and on to a wish list. They can then then look at it with fresh eyes when it comes time to spend any of their money.
At 2 years old, Crab doesn’t fully understand it all, but it’s setting him on a good path for delayed gratification instead of the gimme mindset.
Highlighting your good money habits helps children learn from your choices and possibly push aside those not-so-good choices. Getting them involved in list making or other good habits ingrains good behavior naturally.
Teach them About Discounts
Monkey is well aware of coupons or discounts when shopping. I remind him that we don’t like to pay full price, and there are always bargains to be found for the things we need or want.
On a recent shopping trip, he was given a $10 bill for his first day of kindergarten from a distant relative. We decided together he’d like to save half of it in his piggy bank and spend the other half on Play-doh. We went to the craft store as I told him I had a coupon!
He looked through prices to see what would be a $10 item at 55% off to cover sales tax. After he selected the item, we went to purchase it and found out the coupon would not work for the Play-doh (I was unaware otherwise I would’ve steered him in a new direction).
At checkout, I said it was above his budget so we’d have to reconsider our options, much to the stares of the women around me. He said okay and we left the store with nothing. On the way out, we decided to stop by the dollar store and he picked out two packs of his favorite gum for $2. Then when we left, he said he had, even more money to add to his piggy bank (a whole $3 more).
That might sound like a cheap parent to you, but to me, I look at it as an experience in delayed gratification. He was unable to cover the cost of the original item he wanted, so instead of paying for it for him, he learned that he can always just walk away.
Don’t be Afraid to Say “No” and Explain Why
We are also not shy when it comes to Monkey asking for extravagant things. Recently, he’s been asking for a $2,500 Kirby Vacuum (he has a passion for vacuums https://youtu.be/qatScdrWDWg). We explain that there are budgets for holidays, gift giving, and even vacuum purchases. We aren’t afraid to say “No,” or put the item on a wish list to consider later.
Mr. 1500 note: I think it’s hilarious that a child has a passion for vacuum cleaners!
Mrs. 1500 note: I wish ours did…
With regards to the Kirby, we explained why we would not be purchasing the vacuum; nor will Santa show up with it. Santa clearly works off a budget, too. He already has told me that if there’s no Kirby, he’ll just enjoy what other gifts he is given.
Openness with Finances = Openness in Other Areas
I feel that many shy away from discussing finances with children so they paint a rosy picture of the world around them. We don’t want to burden them with our adult problems, but I feel that from being open, they can learn and sometimes offer great ideas.
There have been countless times I’ve shared a financial concern with Monkey and he’ll say, “Mom, why don’t you try this…” and he actually has a great idea and usually saves us money in the long run. Don’t get me started on food shopping lists! He is all over the fact that if something isn’t on the list we should wait to buy it until next time!
Children will sense if there is tension within the household, and study after study shows that most tension in family life comes from issues with money. The number one reason for divorce is related to financial matters. Being open and getting on the same page with a spouse or with your family; working together toward a common goal, will set you in a different direction.
Our goal is to be open with our children at the appropriate times with clear, non-stressful communication about money, our choices, and what is available to them within our family financial picture. While we discuss money often, we are also mindful that life is more than just money. The people and relationships you care most about are most important.
Talk to your children about your financial situation in a way that is comfortable for you. Don’t be afraid to tell your child that something isn’t within the budget right now, or that they may have to work in order to receive the item. The more you share in a non-traumatic and calm manner, the more they’ll absorb and it will become second nature for them. “Mom, do we have a coupon for that?”
If our parents were more open about how to handle money or shared these things with us, Chris and I might already be on FIRE. Instead, we’re behind the curve, but quickly catching up! Join me over on my blog or the Lifelong Learning Podcast to learn more about our financial journey or whatever I’m learning about in life!
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Hi Kate –
Thanks for the post – a lot of great points here. I especially like the point of talking regularly about money. Overall, the repetition and routine seem to be so important.
On a similar topic, and for a good read, I recommend checking out Ron Lieber’s book – The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money. Ron write’s the “Your Money” column for the New York Times.
Thanks again for your input!
– Mike
Mike @ Balanced Dividends recently posted…How We Got To Averaging +$1,000 a Month In Passive Income
Thanks for the recommendation! I’ll definitely check it out from my local library 🙂
This is awesome! I also had parents who were secretive about finances. I get that they didn’t want us to worry about money, but it would have set my sister and I up better for adulthood.
Mrs. Picky Pincher recently posted…Is college worth it?
That’s the goal, in the end, to help set up kids with a better understanding of all these mystical concepts. If I had known half of what I spent the last 7-10 years learning on my own a few years sooner, what a difference that would’ve made!
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
We’re somewhere in the middle. We don’t hide finances and we do tell our kids things are in and out of budget. But we don’t share everything. Not because of hiding from our kids but more because they repeat everything. You never know who might here and you don’t want to be a theft target.
I don’t worry about being a theft target via in my home, or otherwise. I could be a target with or without sharing this information with my children, so I feel it’s more beneficial for them to learn. Also, we live a frugal existence so those around us know we’re not the house to hit for high ticket items if they need to break-in or steal things. There are far larger well-stocked houses around us without two yappy chihuahuas that’ll suit those people better! 😉
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
My earliest financial memory was the scene of bills spread all over the dining room table while my mom grumbled about how my dad couldn’t be trusted with a checkbook. Now thirty five years later, I’m going to an estate planning meeting with dad and a lawyer in two weeks, where he’ll establish a trust and implement all the things he wishes had been squared away before cancer suddenly took mom last year.
If you’re reading these blogs you’re probably far less inhibited than most about finances. Please share it with your kids. I wish I’d known my folks’ financial state; with a seven figure net worth and a healthy CSRS pension, I’d’ve lobbied for them to retire earlier and spend more time together.
You make a great point! This is definitely one thing I always press Chris on is keeping in the loop on our finances. He has seen how well I’ve managed to get us ahead and sometimes takes less interest. Instead, I kind of push him to stay a part of the game so therefore he doesn’t end up completely lost if I were not to be there to help.
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
Hi Kate, interesting post! One question that I have for you is how do you deal with the propensity of kids to be super open and unfiltered. For example, lets say, you are doing your bills on Personal Capital and your networth is significant. Lets say you have 500,000 in there. You might not necessarily want your child going to school saying Mommy and Daddy have 500,000 because then you might change the expectations other people have of you and your child. So how do you handle this?
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I actually don’t worry about that as I openly post details of our finances on my blog and have shared on Chris’ podcast. I talk openly at work with coworkers about our financial situation and goals much to finding more people intrigued and secretly asking for financial help. I don’t worry about theft either, since we live frugally there isn’t much in my house we are attached to that we couldn’t replace or that is super expensive and the rest is investments or paying off our mortgage. The more we can help others get on a better financial track the better, and we don’t talk about it in a pompous manner so our kids don’t currently either. If anything they ask if people used coupons!
Also, what other people think of my is none of my business. So I don’t consider their expectations anymore than I would a stranger’s. As we’ve become more financially grounded and focused on our Frugal living goals, we no longer worry how we appear to others and friends of all income levels appreciate our honesty. Hope that helps 🙂
This is fantastic. Love the post. Being open with your kids about money has all kinds of benefits. Your lack of caring that others may find out because you want to help them too is amazing. Well done all around. It sort of has an “FU Money” kind of tone to it.
Sure, but make sure that you discuss money in a way that makes your kids feel secure, not like my mom who would sigh and say “I just don’t know where the money for the mortgage is going to come from this month”. If I make a comment that the market or a certain stock is going downwards, I let my kid know that that won’t affect our ability to pay for living expenses. And if my husband makes a comment that the hydro bill or phone bill was extra high this month, I let my kid know that we are still financially secure.
Absolutely. For us, we don’t live paycheck to paycheck, so we never feel we can’t make a bill and we can survive on one salary currently. I remember growing up and seeing how dire things could get financially, so that’s why I’d like to show my children there is a positive side to understanding all of this and not be kept in the dark. I don’t really remark on stocks, as we invest in low-cost index funds for the long haul, but there are times I’ll say – wowee, we spent way too much on food, and explain that’s totally fine.
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
This is great! We aren’t having kids but if in some hypothetical world we did, we’d raise them in a similar way – except maybe trying to make them less passionate about vacuum cleaners haha!
It’s strange to me that money is such a taboo topic to talk about even with your immediate family. For something so important to the way we live our lives, you’d think it’d be talked about more openly…
Dave @ Married with Money recently posted…Life Lessons from Monopoly
We’re hoping he’ll design a future amazing vacuum, he’s so passionate about them. Just at work I was asked to consult my son on if the car attachments for her brand were worth the cost (in all seriousness) so now I have to check with him!
The more we talk about money, the less scary it is, and the more we can work together to achieve whatever our goals may be is my philosophy!
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
Awesome post! As I was reading I was reflecting on my childhood and wow, some of the points you made would have helped my parents. My parents were both born in 1929, so children of the depression. Money had a whole different taboo and context. So growing up, they never talked about it with us! Like you said in your ATM comment, I just assumed money grew on some tree somewhere. My brother and I cried our eyes out when we wanted an Atari 2600 video game system in the early days, but my parents couldn’t afford it. So following your advice, they would just say “NO!”, but they never tried to explain that there was no money tree and that we had a budget.
Overall, money discussions in America are still so taboo it’s weird to me. People seem far more comfortable discussing their sex lives than they do money. Strange indeed.
Accidental Fire recently posted…Executive Demands Executive Limo
Haha, you make an excellent point! Maybe if people spoke more about their financial matters in marriages to reach common goals, they’d have more of the later in your comment 😉
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
We speak openly with our 9 year old and have for the past year or so. It’s interesting looking at it from a child’s perspective. One of the kid’s on his team, and a long time friend, was taking jabs at him after practice recently because we were going home for dinner. This kid’s family eats out I’m guessing at least once every day, The parents work from home and like to post their lunch and dinner shots to FB. After a couple of minutes of listening to this kid list one restaurant after another my son says why would I want to waste my money on eating out when I can get free food at home. Even though it isn’t free and I know he gets that I thought WOW I must be doing something right. Check mark in the win column.
That’s pretty awesome! I am sure we’ll run into those problems when my sons grow up, but we actually chose to live in an area where we are in the uppermost affluent part of the town (instead of spending the same to live at the least affluent section of another town). This way our kids are being exposed to those who are far less fortunate than we are, there is less desire to “keep up”, too. Granted, we are surrounded by wealthier people with large boats and expensive hobbies, but my kids are happy to use the SUP for fun and float around 🙂
If anything, I hope they invite their friends over for a homecooked meal, which they may never experience regularly at home.
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
I agree about teaching your kids about budgeting, but you have to be careful about what you share with your kids. I know my dad didn’t share his salary in front of me because he was worried I would blab about it to my friends and possibly be set up for break-in of our house (even though we had no valuables). Same thing about savings totals–again, a loose lipped kid (and many are) can innocently share information with someone who may a family member that hears a story and has bad intentions. It took myself a while (late into my teens) to comprehend and understand fully thinking far into the consequences of what I say/share, even if I don’t mean harm, and even now in my 30s I still put my foot in my mouth every once in a while. Every kid is different though, so just be sure your kid isn’t a blabbermouth like I was (still am somewhat, lol) before sharing some financial stuff that could cause problems if let out of the bag.
But I agree about teaching about budgeting and saving, especially when it comes to things your kid wants.
For my husband and I, our salaries are public. We are in a public job, so in about 2 clicks you can search our salaries, our cost of our home, and all of our records. It was extremely weird at first in this style of position, but we’ve come to accept it.
There isn’t much to “keep secret” as the state makes all of that information accessible online! With that, we share our expenses, so if anything, people will complain that we have more than enough to take a trip they think we should take. Overall, we just live our lifestyle and our friends and family have come to know what and how we live.
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
“The more you share in a non-traumatic and calm manner, the more they’ll absorb and it will become second nature for them.”
This is so important. I remember many times hearing my mother and stepfather arguing in their room about money and then having them come out and yell at my brothers and me that there would be no movies and no going out to eat this month (as if we were the ones making these decisions), and that we really had to tighten things up this month! I was never sure what was different from one month to the next, As a result we didn’t learn much about budgeting but we were pretty sure that money caused a lot of arguments.
With regard to concerns about kids oversharing private financial information. . . Our son is 12 and we are very open with him about money and where it comes from, how much we spend, and what our goals are. We make it clear that this is information that he doesn’t need to share with the general public, but we’re also clear that we’re comfortable sharing with him due to his general trustworthiness and his increasing maturity. In that way sharing information becomes a reward to him and reinforces the type of conduct that we want to encourage. I think it also helps build mutual trust. He sees that we trust him which makes it easier for him to trust us.
You make an excellent point! As children age, when we share this information it’s a level of trust we’re sharing with them as well. Right now, my son doesn’t really “blab” much or have anything he cares to share, it’s not like we’re rolling in the millions, but as he ages, he will also learn from our openness about when and how to discuss money with others. He hears our discussions among friends and family, and he learns by our model. It helps to know your child and like I said above, share what you feel is best for their level of understanding. Thanks for reading!
Kate recently posted…Cheesequake State Park HASHaTHON 6 Mile Race Recap
Some good points are made!
As a 22 year old, I can say I think it’s a missed opportunity that my parents never involved me in their financial matters. Figuring it out on yourself might take a while.
My parents never opened up to me about our net worth when I was younger. My father was a software engineer and we were well off when I was younger, but I never knew. I distinctly remember thinking we were going to go broke when my parents bought us a basketball hoop for Christmas one year. I think that’s what made me so frugal today. I’d be interested to see how I ended up had I known that we were well off.
You make a solid point. Knowing that you had money in the bank may have made you think differently, but I think that’s why we impress upon our family not only what our goals and what we’re saving for, but also show them how to live below their means and also still enjoy life without the added stress of “things” that others covet, too.
We were very open about not borrowing money, buying cars with cash, paying off the house early, giving generously but we didn’t admit my salary or our networth until they were college age. They were shocked we were millionaires because they were never spoiled by us and we lived frugally. It was pretty funny to watch.
That sounds delightful!
I actually never wrote about net worth above or revealing that to my children in the post, so I find it interesting that is what most are hinging on what they should or shouldn’t share with their kids. No one says you have to say “we’re millionaires!” all the time, but you should share those great financial habits and explain how money works in our economy as they grow 🙂 Plus, our salaries are public, so we couldn’t hide if we wanted to.
Also, I think net worth can be calculated in so many ways that there is no single number that is exact for every person. I consider the ways we help our community part of our “net worth” in general outside of monetary worth and impress that on our children, too.
Kate recently posted…How Open Should You Be With Your Children About Finances? Guest Post on Mr. 1500!
Totally true; children are very logical and just want a valid reason for your decision-making. And that is why they are great problem solvers. A couple of times my kid has told me that something in Target is “too expensive”, 🙂
My kids are still a little young to understand personal finance (4 and 2), but we try to be very open with them.
When they ask for things at the store, we always let them know they can’t have it because we want to have other things, like food, a home, electricity, etc. I’m not sure they understand yet, but we’re trying to teach priorities.
As far as our actual net worth goes, I think it will be a long time before tell the kids. Hell, we don’t even tell other family members that we’re FIREd.
Mr. Tako recently posted…Quality Camera Gear On A Frugal Budget
My wife and I are having our first kid next April, so this article really hits home. I know on one hand I’m going to want to give the kid everything he or she needs & wants, but on the other hand I want them to learn to be responsible with their resources, including money. I love your tips on doing bills & budgets in front of them, and that it’s never too early for children to learn about finances.
It’s funny, I was literally just talking about this the other day with my wife. My oldest daughter is only 4, so it’s hard to talk about money when she is just starting to grasp the concept, but we’ve been working on it as much as possible since the beginning.
For example, if she wants two things at the store, we’d tell her we only have enough money for one (even if we could afford both, it’s about teaching them opportunity cost).
Looking forward to when she’s a couple years older and starts getting an allowance!
Eric Bowlin recently posted…Karma’s a B*tch – How I Made a Fortune by Doing The Right Thing
This is awesome. Start the kids off right. I have a niece and nephew. The girl is good with money and the boy blows every penny.
Financial Velociraptor recently posted…Assigned shares of Sirius XM (SIRI)
Your little boy is adorable!
I know this is a little late in posting… but… if you want to be terrified look at this:
https://seekingalpha.com/article/4128545-filial-support-laws-a-sleeping-giant
For real?
Whoah, that is crazy. And not good.