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Including your Children in Conversations About Money

By George P. Kite lll September 26, 2014

Should you include your children in your household financial conversations?  I would recommend doing so in order to promote transparency, trust and open dialogue.  After all, you will expect that same level of trust and transparency from them as they grow older. However, I think being tactful is a prerequisite especially if the family has fallen on hard times.  We want our children to be cognizant about certain household financial constraints, but we also don’t want them to assume any stress and anxiety about these constraints.  After all, they are just kids and we want them to be somewhat care free (there will be plenty of time for worry as they become adults with responsibilities).  

A colleague here told me a great story of how she implemented this strategy of inclusive conversations.  She is a single mother and her two boys were always asking her for items that she couldn’t afford (designer jeans, brand name shoes, etc.).  Being children, they just assumed that mom was being mean because she didn’t buy what they wanted.  So, when her boys were in middle school, she sat them down for a conversation on the household money situation.  She told them that she would love to do everything they asked of her, but she only made so much money.  “Here is how much money I make and here are our bills”, she said.  She gave them ownership of how to make adjustments to the family budget by categorizing expenses for them into fixed and discretionary spending.  

They understood that the family had to have money for food, clothing and shelter (fixed), but that they had to make decisions on what sports to play and whether or not to join the neighborhood pool (discretionary).  The boys quickly learned to evaluate the tradeoffs and weigh the opportunity cost of their decisions.  My colleague also used this strategy to help decide where to take vacations and for how long.  It didn’t take long before they figured it out and started weighing these decisions out on their own instead of asking.  In the end, they realized that mom wasn’t being mean, but was trying to allocate her resources the best she could.  She enlisted them in that task instead of fighting with them.

Parents don’t want their children to want for anything, but they also want them to be financially independent as adults; and this begins with awareness that money is a limited resource within our families.   Like my colleague and her story, evaluating decisions using opportunity cost is very educational (T-ball or cable TV, one big vacation or a few mini vacations, one pair of expensive jeans or 3 pairs of regular jeans, etc.). In today’s world of instant gratification, this lesson in needs vs. wants and tradeoffs is very important.  Here is a great article from Dr. Phil about How to Talk to Your Kids about Money if you want more ideas.

How do you talk with your kids about the family money situation?  How can you enlist your children as team members instead of fighting them as budget adversaries?

Thanks to Call Federal for this monthly piece to help us all learn and stay financially healthy. 

This column is only for the purpose of giving general information and is not intended to offer personal financial advice. Every situation is unique. Nothing in this column shall be construed as offering or disseminating specific financial, retirement, estate, tax, or legal advice. If you require any type of specific advice, please consult an attorney, qualified tax professional or Certified Financial Planner (CFP®).