Personal Finance and Families: How Much Detail Should The Kids Know?

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?

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  1. Wil says:

    THANK YOU! THANK YOU!

    I’m glad this is an issue in your circle. Personally, I think it’s important that you teach your kids about finance, and sharing some of the details can be a huge benefit there. I don’t think kids are ready for all the details, but I look at teaching kids about finance like teaching them about sex. Share information that they can handle, as they can handle it, and don’t explain more than that.

  2. Debbie says:

    In my family we got an allowance when there was extra money and we got chores when there was work to do. There were always chores, but I only got an allowance during two periods. I liked that part of how I was raised.

    Growing up I always knew we couldn’t afford frivolous things, but later I realized that wasn’t strictly true. For example, I learned that those big bouncy balls that are really fun only cost a dollar. We totally could have afforded that, and I should have asked for one.

    Feeling that we couldn’t afford anything at all kept me from learning to research things to find the ones that were affordable. So I think I could have learned more skills if I had better known what was going on.

    On the other hand, I did learn very good skills on not wanting everything in sight, and that does come in handy.

    You could argue that we had the kind of finances people worry over, but I never worried. We moved a lot chasing after jobs (not quite as much as farm workers, but an average of three times every two years until I was twelve), and we were even on food stamps once when I was in high school, but I never got the idea that we were in danger of going hungry or living on the streets. Everything always did feel like it was alright. Having peanut butter and jelly for lunch every day except for the occasional week when we got egg salad or baloney and cheese did not feel like deprivation–it just felt like the way things were done in my family.

    I’ve read that kids can tell when their parents are stressed, and if the parents don’t talk about it, they make up their own explanations, which can be much scarier. How can you reassure your kids about what’s NOT wrong if you don’t tell them what IS wrong?

    Kids are very resilient. Some of them even have good ideas. If I had kids, I like to think I’d share at least the big picture.

  3. 3bean says:

    I’m conflicted. Being open is good, but you need to preserve a child’s innocence. I was a happy kid, but like many girls, I wanted to please people and this desire often resulted in being anxious and worried. In a recent conversation with my Dad about finances (I’m currently 29 years old), he admitted there were some months when I was a kid that he didn’t know if he’s be able to pay the mortgage. If I had known this as a kid, I’m afraid I might have gone off the deep end in worry. On the converse, my parents weren’t overindulging us while worrying about how to pay the mortgage.

  4. Any Penny says:

    What a good topic!

    To get our kids interested in reading, we got them library cards. To get them interested in saving, we opened savings accounts for them. To get them interested in investing, we bought stocks in a few good companies they knew.

    Now they each read four or five grades levels above their age. They choose to put their gift money in their savings accounts. They follow the prices of their stocks and news about their companies. By buying the stocks over time through a DRIP plan, I have had the opportunity to discuss how the fluctuation of market can create opportunities for them. They understand the concept of dollar cost averaging.

    I think it is important for the kids to learn the basics of household accounting. As soon as they begin to show discretion, you can share more of the details with them. I look forward to turning Quicken over to my son before he leaves the house. A few years of experience, can only help him in the future manage his own finances. I think we have an obligation to teach our kids this basic skill.

    I have to share with you a story when my son was about 5 years old. I took him to a toy store. On the way there, I told him, he could spend $5 any way he chose. In the store, he ended up in front of a shelf crying, “I can’t afford anything!” – Another invaluable financial lesson.

  5. bluntmoney says:

    I don’t mind letting my son know the details of my finances (and he reads my blog). Part of my family always discussed money and I found it beneficial both as a kid growing up and over the long term.

  6. plonkee says:

    I think it depends on how you feel about your finances, not what state they are in.

    If you feel positive then sharing your finances will give the positive benefits. If you feel negative about your finances they you’ll get the negative drawbacks.

    The state of the finances were not discussed in my home and I’ve picked up plenty of ‘rules’ about money that are difficult to shake off. Fortunately they aren’t bad rules, although some are indifferent.

    Whether you share or not, you’re still teaching the kids about money. If you’re not sharing then you might be accidentally teaching them the wrong things.

  7. Christine says:

    I agree with what 3bean said about worrying. My parents never told me much information about our financial situation, but because we were rather frugal (No, we are not buying fruit snacks, they are over priced. No, no gumballs, it’s a waste of a quarter) I figured we didn’t have much money. And then we would go on cruises every once in a while, and trips to Disney. It was rather perplexing, and I worried that my parents were wasting too much money.

    I think that if they had been a little more open (“We have money, but we keep it by living frugally and we spend it on what we enjoy, travel, every once in a while”) I would have been a little bit more content. On the other hand, my parents have always talked to me about money, and talked about our specific details as I got older, and what I could expect from them financially (as far as college etc. goes). I think the initial worry of being poor was perhaps a good thing- it made me appreciate our financial possition more, and also engrained a sense of frugality in me.

    I’m a freshman in college now, and when my friends make a Wallmart + Starbucks run I’ll get the 25 cent soda at Wallmart so I can sit around in the car (we sit and talk in the car, not Starbucks) drinking something that doesn’t cost $5. I started a Roth IRA on Monday, without the aid of my parents (I’m babysitting my sister while they are in Germany and I’m for a short break). I think that, over all, I’m in a pretty good place right now, as far as understanding money and such go, for a person of my age.

  8. Shadox says:

    I definitely think that you can take the sharing concept too far. There is only so much that kids should know about the family finances, and for me the line probably crosses at the concepts level.

    Teaching concepts, yes. Sharing details, no. Talking to kids about investing, and even opening savings and investments accounts with them are good. Explaining about debt also a great idea. Sharing exactly how much you have in your bank account, how much you earn and what you owe, probably not such a good idea.

    For one thing kids may not really get the concept of discretion. What you share with your kid may be innocently passed on to others. Also, as others have mentioned above, burdening your kids with financial worry may not be the best strategy.

  9. Deepa R says:

    My own parents have been totally open with me regarding their finances, and have used this to teach me the value of money.I would often be shown bank statements & savings , and told what all things could be done with it – and which of these options would gratify, make more money or just erode it. They were not serious when they asked me how I’d spend the money, but they were teaching me sound financial sense. One of my Dad’s favorite pieces of advice is “Money has value till it is with you; the moment you spend it, its lost . Unless of course its spent on some non-depreciating asset like real estate or bullion, or for quality education that builds up earning potential for the future.” It doesn’t mean that you be a tightwad, but rather that you think whether you really need that new outfit, or not – before you make the purchase.
    Regarding “Even worse, they could potentially use that knowledge to disrupt things in family life, such as wanting to use family savings for immediate gratification.”, that situation never arose, because of the cost-benefit analysis that I was asked to do regarding hypothetical purchases with real money. Besides, the way I was brought up, we put the family first- so the selfish demands rarely ever came in thoughts.
    I guess openness about finances depends more on the family than being a generic rule – If you have a culture of cooperation & understanding, along with a deep sense of togetherness plus foresight & future planning, there would be no harm in sharing & discussing family finances with your kids. If these are missing, not only do you need to look at what all you need to withhold, but also at how your family is being run.

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