Some people believe it’s wise to tell all to their children. I don’t. When it comes to money, I think there are some things that kids—particularly young kids—aren’t ready to process and, frankly, don’t need to know. In some cases, it’s simply a pragmatic decision. If you tell your kid your salary, for example, be prepared to be hounded about why he can’t go on that beach vacation or get that $8 bag of popcorn at the movies. Or just as likely, be prepared for him to tell his friends.
The point is, as a parent, you have a right — and, arguably, an obligation — to sometimes say, “This is something for Mom and Dad to keep private. It’s not that we’re trying to keep a big secret from you; it’s just that there is some information that parents do not share with children until they are much older.” Here are a few things your kid probably doesn’t need to know:
1. Your salary. Whether you earn $50,000, $150,000, or $500,000, there’s no need to share numbers. That doesn’t mean you can’t give your kid context. For instance, you can tell him that the median (meaning exactly in the middle) income in the United States for a family is about $65,000, then let him know where you stand in relation to that number. These amounts might sound like a lot or a little to your child depending on his age and his awareness of what things cost.
2. Which parent makes more. If you and your spouse both work full-time, avoid discussing who earns more. Putting dollar figures on what Mom and Dad earn can send the message, especially to young children, that one parent’s contribution is more important than the other’s. If the disparity weren’t important, why would you have shared it with them? Of course, many teens will know, for example, that corporate lawyers tend to make more money than schoolteachers. If your child brings up the topic and wants to know why your job as a social worker pays less than your spouse’s banking job, this is a great chance to talk about the psychic rewards and trade-offs that one or both of you make in order to have the lives you choose. If one spouse takes care of the kids full-time and the other works for a salary, it’s a good idea to discuss the value of stay-at-home parenting, making it clear that this is a job, too. In general, regardless of the details, it’s best to display a unified front: We’re a team, we work together, and it doesn’t matter who earns what.
3. The amount in your 401(k). When I was about 10, my neighbor Susan told me that her parents had a million dollars saved in their retirement accounts. My first instinct was to think she was a liar. After all, I didn’t know anyone who had a million dollars. Whether it was true or not, no good came from my knowing this information—or misinformation, as the case might have been. Your 401(k), pension plans, savings, and investment accounts are your business. Your kid doesn’t have the perspective to understand that this isn’t money you should tap now, and that even when you do start drawing it down, it has to (hopefully) last a very long time.
4. Your belief that Cousin John or Aunt Louise is cheap/rich/a deadbeat. All families have their eccentric characters. And truth be told, a great deal of family dysfunction centers on money. But this type of talk is to be had out of the earshot of children. Sure, you’re irritated that your lovable but irresponsible younger brother owes you $1,000 but is going to Aruba before paying you back as promised. But if you mention this around your child, he’ll not only hold it against his uncle but also remember it long after your brother has paid you back—an update you might be less likely to mention. If you’re looking to teach a lesson about the hazards of lending to family members or friends, go with a story that’s not about people they know (or simply change the names).
5. How much you pay the babysitter/nanny/tutor. Jana likes to tell the story of how shocked her kids were when they learned that their beloved babysitter Jennifer—who was always a joy—was actually paid. They believed that, if anything, Jennifer was paying their mom to hang out with them. It’s fine to tell kids early on that babysitting is a job like any other (albeit the most important one I have ever hired someone to do). But definitely do not tell your kids how much you pay. Doing so gives your children an informational upper hand that you don’t want them to have when it comes to their caregivers, whose job it is to be the boss when the parents aren’t around. The last thing you want to do is strip that person of his or her authority.
6. What you spent on a gift. The joys of giving and receiving will be lost on your kid if you mention the price each time you give a present—whether it’s for your son or daughter or for someone else. First and foremost, the value of a gift is not always reflected in its price. After all, some of the best gifts, like making pizza with Dad or building a couch fort with Mom, are basically free. But during gift-giving occasions, you might encounter upset kids, and that’s an opportunity to talk about money as well as the spirit of giving. Remember that sometimes kids aren’t so much entitled as clueless and need to know the facts. The 10-year-old nephew of a friend was in tears at his birthday party when he noticed that he had gotten fewer presents than in previous years. His mom had to explain that now that he was older, the things he wanted cost more money. So a few of his relatives had pitched in to get him the pricey iPad he really wanted, rather than a bunch of smaller gifts.
7. How much you worry about paying for college. If you’re like most parents, the idea of paying for college one day is nothing short of terrifying. Though it’s great to talk about college when your kid hits high school, there’s a difference between having purposeful conversations and radiating anxiety. Avoid overly negative talk about how expensive college is or how stressed out you are about affording it. Even if we are talking in general terms, our rants and raves can easily be misinterpreted by our offspring, and they might conclude that college is a major burden that they don’t want you to have to shoulder. Of course, you shouldn’t make a blanket promise that you’ll foot the bill no matter where your kid gets in if you aren’t sure you can do that. But you can and should say that college—or any sort of higher education—is a priority, and you are truly glad to be saving for your child’s future.
This is an excerpt from Beth Kobliner's "Make Your Kid a Money Genius (Even If You're Not)."