“You mean we pay for the internet?!,” said my 11-year-old.
“Ummm, yes….we do!” I replied.
“But, I always see signs for free wi-fi.”
and on went our conversation about how the wi-fi is “free”…because someone had to pay for it and then offer it for free.
This conversation I had last year with one of my boys is the reason why my husband and I try to be fairly transparent with our kids about finances. It is not our intention to let our boys walk around with rose-colored glasses and have no concept about our costs of living, vacations, sports activities and more.
Lifeis Expensive!
Life isn’t cheap and we want our kids to know that BEFORE they walk out the door for college. It is very normal for me to open the mail and leave a stack of bills on the kitchen counter before they make it to the office. I might hear a comment from one of the kids, “Our electric bill was $160?”
It opens up a conversation about the reality of life. Simple conversations about how:
- lights they leave on in their bedrooms add to the electric bill
- the super long showers they take add to the water bill
- the fire we had in our gas fireplace adds to our gas bill….. and the list goes on
Nickel and Diming | What’s a Priority
We try to give the boys an understanding of why we do what we do. A perfect example of this is when we go out to eat. It’s very normal for us to all order water. We used to get complaints from the kids, until we took a look at it financially:
5 drinks x $2 each = $10
$10 x 4 meals out per month = $40/month. Just. for. drinks.
This makes sense to our kids. There are a lot of other things we can do with that $40 that are more beneficial to our family. The dollar spent here and dollar spent there add up. Keeping track of this helps them understand how quickly $20 cash in your wallet can be spent.
I have shared in the past that our kids are old enough to be making money on their own. When they bring money home from lawn mowing, babysitting,umping baseball games or even doing chores, we stress the Tithe/Save/Spend rule.
It’s what we do with our finances and feel that if the kids start out at a young age doing this, it will become a habit to give away 10% and to save a percentage.
As the kids divide up their money into different envelopes, they quickly see that the amount that gets placed in the “spend” envelope is not actually that much!
Real Life Application |Why we Share Our Finances with Our kids
Chances areyour kids willnot learn this direct applicationin school. Take a recent bank statement (or credit card statement if more applicable), and either create a spreadsheet that isolates all ofyour family’smonthly expenses or make of copy of the monthly statement and mark over any items that you may not want your kids to see (e.g., incoming deposits, your bi-weekly/monthly salary, etc.)… remember, theobjective is to give them a glimpse of adult life expenses. Explain to them what each expense is, and let them see the corresponding amount. This not only gives them a sense of how much things cost andhow many things cost, but is alsoa good opportunity to explain what a mortgage is, what insurance is and why it is necessary, and other things like utilities (gas, electric, water, sewer, garbage, mortgage, health insurance, etc.)…. things they may not have known to actually cost money.
Depending on the age of the child, this can lead to further discussions about costs as it relates to stages of life. It is important to explain thatthe monthly expenses you discuss with them,may not(should not)apply as soon as they are out on their own. Help them understand from the start that expenses shouldbe proportionate(less than) the amount of money they earn and that the ability to pay for things usually (but not always)expands over time. Unfortunately, a lot of young adults do not grasp this reality, and immediately expect to have the same lifestyle as their parents (not realizing that their parents’ lifestyle evolved through an accumulation of life experiences/years).
The objective of the exercise is justtoinitiate a discussion with your child about somebasic, real-life examples to help further their understanding (and hopefully appreciation) of the costs of living.
FAQs
But addressing money and family finances with our children can teach skills that will help them be financially competent adults. So, as uncomfortable as it may feel to talk money with our kids, it's worth it when we view it as part of nurturing critical skills for future self-sufficiency.
Should you show your kids your finances? ›
While your adult children don't need to know exactly what your income is, they do need to know where it comes from. That's why it's important to review all your income sources with them, says Kimberly Palmer, personal finance expert at NerdWallet, a personal finance app aimed at simplifying money management.
Should you tell your kids how much money you have? ›
In my opinion, late teens or early 20s is an ideal age range to begin having these conversations, especially if your child is heading off to college or beginning to think about their first job. The important thing to stress is that income should not be used to compare your family situation to anyone else's.
Why you should talk to your kids about money? ›
But teaching children to be financially responsible early on will help them cope with challenges like setting limits, planning a budget and resisting impulse buys. There are a lot of different ways to help kids get smart about spending, but we've put together some basics to help parents get started.
Should parents tell their kids about their money problems? ›
Parents tend to underestimate how much kids notice and what they're capable of understanding, but it's important to be honest and discuss the situation in an age-appropriate way, added Rose. Starting a conversation helps: Build trust between you and your child.
Should you tell your kids you are rich? ›
While there is no exact age to reveal, as a parent you will have to gauge your child's maturity to reveal the specific of your fortune, from an early age families should attempt to deliver consistent communication regarding how fortunate one is to be financially stable.
At what age should you be financially independent from your parents? ›
There's no one-size-fits-all answer to this question. Some people begin covering all their own living expenses starting from age 18. Others become financially independent in their 20s or 30s.
Should you leave money to your children? ›
Should You Leave an Inheritance to Your Children? This decision will differ for every family depending on the relationship of the family members. In general, leaving an inheritance to your children can help them through life, ease their financial burden, and represent your love and care.
What not to say to kids about money? ›
11 Things You Should Never Say to Your Kids About Money
- 'It's just money' ...
- 'Don't tell [other adult] how much we spent' ...
- 'I don't know how I'm going to pay for that' ...
- 'You don't need to know how much I make' ...
- That a family member owes you money (or you owe them) ...
- 'We can't afford that'
By the time kids are seven a lot of their financial habits are already formed, he added, noting that kids are aware of and are curious about money far sooner than many parents might expect. Hirshman suggests starting even earlier, between three and five.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
How do you explain finance to a child? ›
How to Teach Preschoolers and Kindergartners About Money
- Use a clear jar for their savings. ...
- Set an example with your own money habits. ...
- Show them stuff costs money. ...
- Show them how opportunity cost works. ...
- Give commissions, not allowances. ...
- Avoid impulse buys. ...
- Stress the importance of giving. ...
- Teach them contentment.
Very young children won't fully understand the value of money, but they can start getting introduced to it. A fun way to do this is to learn the names of coins. One way to do this is to play the coin identification game.
Why parents shouldn't give pocket money? ›
Pocket money can teach children bad money habits or make it easier for them to make poor choices. If you just hand over pocket money, you're teaching your children to expect something for nothing. And they may learn to depend on you instead of being resourceful.
Do parents talk to their kids about money? ›
Rowe Price survey, 69% of parents have some reluctance when it comes to talking about money with their children. And only 23% of kids say they talk with their parents frequently about money. There's no need to schedule a five-hour lecture presentation to review bank account balances and retirement plan contributions.
Why parents should not give pocket money to their children? ›
This can lead to overspending and may not teach good financial habits. It may lead to entitlement: If a child is given pocket money without having to work for it, they may develop a sense of entitlement and expect to receive money without having to earn it.
Am I responsible for my parents finances? ›
Family members often worry that they may be responsible for repaying these debts, but the good news is that they are not transferrable. This is a common concern, but even if you have financial power of attorney (POA) for a parent, you are not liable for their debts.
Am I financially responsible for my parent? ›
Filial laws require children to provide for parents' basic needs such as food, housing, and medical care. The extent of filial responsibility varies by state, along with conditions that make it enforceable including the parent's age and the adult child's financial situation.
Is it OK to help your parents financially? ›
First, sit down and chat with your parents about your desire to help them stay afloat. Make sure they understand that you're not looking to take away their independence and emphasize that any financial assistance you provide will be solely based on their wishes and preferences.
