In a recent New York Times column, Ron Lieber recounted one parent’s all-or-nothing approach to financial education with his kids. The dad withdrew his entire monthly salary from the bank—in dollar bills. He came home and dumped the loot on the kitchen table. Then, along with his kids, he divided up the money to show where it all went every month. A tithe to their church. Twenty percent to taxes. Money for soccer and scouting and eating out. A big pile for the mortgage payment. At the end, or course, just a few singles remained unaccounted for.
Within the past year, I’ve faced the “How much do you make?” question from one of our kids. I didn’t handle that one particularly well. The experts suggest the same approach you might use for questions about your drug use or sexual history: Don’t get defensive, just ask “Why do you want to know?” But many of us—me included—were brought up in families where financial information was held extremely close to the vest. And because we don’t talk often about money, we’re not very good at it when called upon.
What is a better approach? Including children in age-appropriate decision making about money. If the cost of a teenager’s ballet lessons goes up, let her decide whether to cut back on lessons or babysit to cover the increase. Let your children decide whether the family goes to Carrabba’s or puts the cost of the meal towards a special vacation.
There’s a fundamental reason why avoiding the talk about money is a bad idea. One of our most important responsibilities as parents or grandparents is imparting a system of values to the next generation. As they grow up, children become increasingly aware of how we spend our money. But there are big gaps in their knowledge. How could a kid know what you give to your synagogue, or contribute to your retirement plan, or put aside for their college tuition, if you don’t talk about it? Only by being frank with them—in an age-appropriate way—can we transmit our financial principles. Soon enough, every kid will be deciding whether to defer $100 to a 401k account or buy a great pair of ski goggles. We can help them make the right call.