I’ve been a part of a parenting email community for almost two years now, and recently we’ve been engaged in a lengthy discussion about the degree to which our children should be aware of our personal finances. The differences of opinion have been dramatic, and I’ve collected some of the pros and cons here for you all to think about before I give my own conclusion.
Reasons why you should let your child know all the details of your finances:
Communication Letting your child know the financial situation of the family lets them know exactly what the financial state is and how their wants and needs fit into that bigger picture. They feel more integrated into your lives, and when communicated well, can facilitate a stronger family bond. This can even result in a child that can contribute effectively to the family economy instead of fostering a “me me me” attitude.
Setting an example If you have good personal finance habits, letting your child see the whole picture can be a great demonstration of how a mature person handles money. This can set them up to manage their own money in a similar way, plus it can be a great example for how they should behave later in life.
Reasons why you shouldn’t let your child know all the details of your finances:
Privacy The actual state of your finances is none of your child’s business. Even worse, they could potentially use that knowledge to disrupt things in family life, such as wanting to use family savings for immediate gratification.
Innocence Children shouldn’t be given the burden of worrying about a family’s finances. They’ll have to face the real world soon enough.
My take is that if you are fiscally responsible, you should be open with your finances with your children. You can show them how things are done, introduce them to the general financial concepts you live by, and get them involved in family life, the earlier the better. However, if your financial situation is precarious, especially if it’s due to your own mistakes, the drawbacks (stress, etc.) may not be worth any benefits from sharing.
I plan on having monthly family meetings when my son gets older where we go over our finances and family expectations. I feel good about my finances and I really feel as though the things I am doing now represent a very sound financial philosophy to live by. I want to use myself as an example for my child, at least in the domain of how to properly manage your money.
What do you think?