Are Parents Terrible Personal Finance Role Models?

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Recently, I came across this article from Time Business arguing – quite convincingly – that parents are poor financial role models for their kids. From the article:

Most parents (77%) say they are not always honest with their kids about money; 15% lie weekly. Half are willing to discuss saving and spending issues but almost no one talks about tougher concepts like inflation (19%), investing (16%), diversification (11%), and asset allocation (8%). A third avoid talking about the family’s finances altogether.

Let’s break that down, piece by piece.

Most parents (77%) say they are not always honest with their kids about money As a parent, I will say that it’s incredibly difficult to always be 100% honest with your kids about money – but that depends on what you mean by honesty. Some parents might view full honesty as requiring them to tell their children about every financial issue that might affect them – otherwise, aren’t you being dishonest by exclusion? I think that it’s very valuable for parents to be fully honest with their kids when financial questions come up, but they don’t need to be privy to every financial discussion, particularly when they’re young.

15% lie weekly This part is a bit awkward, though. If your financial situation is in such disrepair that you feel the need to lie to your kids about money weekly, then something is awry.

Half are willing to discuss saving and spending issues Only half? Also, discussing these kinds of things in the abstract isn’t a good way to reach teenagers or younger children. You have to make it tangible and connected to something in their life that they care about.

[A]lmost no one talks about tougher concepts like inflation (19%), investing (16%), diversification (11%), and asset allocation (8%). These are tougher issues to discuss, particularly when children are younger, but I think all of them should be a part of discussions during the teenage years.

A third avoid talking about the family’s finances altogether. A third? That’s a third of children who will have no idea what to do about family finances when they reach adulthood.

I draw two conclusions from all of this.

First, there are a lot of families in financial distress. If you’re lying to your children on any regular basis about your financial state, then there is some aspect of your financial life that you do not feel comfortable with, which is usually a sign that there’s something out of whack.

I’ve found that, as a parent, my children are moral arbiters, to some extent. If I’m doing something, I’ll often ask myself whether I could explain the decision I’m making to my kids and explain why it’s the right decision. If I couldn’t do that, should I be doing it at all?

It’s a pretty simple test and it cuts right through a lot of nonsense. It also makes it easier for me to explain anything going on in my life to them (except for the strictly adult elements).

If we’re in financial distress, it’s going to be as a result of a series of bad choices on my own part, ones that I would be unable to explain to them. If I’m making a decision I can’t explain to them, I think very seriously about whether or not I should follow through with it.

Second, a lot of parents simply can’t find a way to communicate money issues with their children, whether it’s because of an uncomfortable topic or because of their own lack of knowledge.

Neither one is an adequate reason to skip out on discussing a money topic with your family. If you skip talking to your kid about a life issue because it’s uncomfortable or because you don’t know enough about it, you’re failing as a parent.

If I ran the country, every parent would receive a copy of Raising Financially Fit Kids the day their child was born, and they’d be required to read it. It’s the best one-shot book I’ve seen on how to teach your children about money issues.

If you’re a parent and you would mark a poor answer on any of those survey questions, rethink how you’re teaching your kids about money. You’re doing them – and by extension yourself – a disservice.

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