I had a conversation with a woman I know recently about money and kids. She made a comment about hiding her income tax papers from her kids so they wouldn’t come across any details of her and her husband’s income. ‘’I don’t want them seeing our gross income and suddenly thinking we’re rich and they can have anything they want’’- she explained. She and her husband make decent income and she is doing her best to hide this fact from her kids. She is of the opinion that children shouldn’t be involved at all with their money.
She and I differ. I think kids should very much be in the know when it comes to family finances. They need to know and understand how money works and where else can they learn (multiple times), with the security that is home? Though I have learned quite a bit about personal finances, it was all self-taught, as an adult. In the situation of this couple, she has a learning opportunity with her kids to educate them. She can, and should, teach them how far money really goes.
I read something once that said the easiest way to teach kids about taxes is to eat 30% of their icecream. She can start with this point. Show her kids the number on paper and then show how much is taken away in taxes. Now there isn’t as much money, is there? Kids think $100 is a lot of money when in reality you’re only taking $70 home for every $100 earned and of that $70 it gets split between food, housing, savings, and family activities it really doesn’t go as far as a child may think and they need to see this, not be sheltered from all finances.
Saving is so important. Both Long term and short term savings goals are not only vital to financial success but help prevent debt- one of the most important financial lessons you can teach your kids. Even though it may be your retirement goals, kids need to see how much work it is to reach this goal. Maybe you’re saving for their post secondary, show them. Let them know how much of your money you put aside every year for their future goals.
Financial education is not something we can assume they will learn outside of the home. Unfortunately they don’t learn enough about it in school, despite it being one of the most important skills a child will ever learn. Kids will appreciate the trust you give them in discussing the family finances. There are many ways you can go about actually having the conversations and you can release as many or as few details as you want. I’m of the opinion that it’s a family unit and though there may only be one or two income earners the money if for the family, the more transparency they better.
Do you share financial details with your children? If so, how much detail?