"Our survey findings showed that most parents have begun discussing finances with their children before age 13, and nearly half of respondents said that sensitive financial topics are not off-limits for conversations with their children," says Linda Descano, a personal finance expert with Citi. "However, the topics that most respondents found off-limits were 'the amount of money I make' (with 28 percent believing this was off-limits), 'the amount of savings we have' (27 percent) and 'the amount of debt we have' (26 percent)."
The study also found that 13 percent of people don't want to talk about the value of their home with their kids, and 10 percent don't want their kids to know the cost of their school's tuition. Many parents mistakenly think it's better not to discuss family financial issues with their children, says Ric Runestad, owner of Runestad Financial in Fort Wayne, Indiana. He says reasons for believing money is a taboo topic include:
- Some parents don't want to trouble their kids with adult concerns about their income, debt and savings.
- Some parents are afraid their kids won't respect them if they don't make much money and have a lot of debt.
- Some parents with a high income and a lot of savings fear their children may become more demanding for material objects knowing their parents can easily afford them.
Avoiding the Issue
According to an Ameriprise (AMP) study, "Money Across Generations," 35 percent of adults say that discussing money and finances with their family members is likely to cause a disagreement.
"If this is the case with your partner or other adults in your family, save these conversations for times when your younger children are not around," says Suzanna de Baca, vice president of wealth strategies at Ameriprise. "It's important to have financial conversations with children of all ages to provide opportunities for teaching and learning, but young children can be especially sensitive to arguments and it may cause them to view all financial discussions with negativity as they age."
In the same study, 70 percent of American adults said that growing up, their parents rarely or never talked about how much money the family had, but 75 percent said their parents regularly or occasionally talked about the importance of saving money.
"If you're hesitant to discuss how much you [and your spouse] make in income each year, that's OK, but don't avoid all financial conversations," says de Baca. "Talking about the value of saving and making prudent financial decisions with your children can have a lasting impact on their financial attitudes."
Overcoming the Taboo
Financial experts say talking about money is one of the most important ways kids can learn how to handle their own finances as they become adults, particularly because financial literacy has yet to become a standard part of every child's education.
Runestad says that discussions about financial decision-making should be frequent, but he says any discussion about family finances should start with an explanation that the information isn't to be shared with anyone outside the immediate family.
"When parents should start including the children in discussions of family finance will be driven in part by the children themselves," says Runestad. "The children should be responsible enough to handle the information and its confidentiality. They must have shown the maturity to process this information."
Tips for Talking to Kids, From de Baca:
- Know your child's level of financial maturity and asses what's relevant for them to know about your household finances. If you're not comfortable telling them how much you earn (whether you're financially comfortable or not) or that you're struggling to make ends meet, don't feel obligated to share with them. However, it's important to have an age-appropriate conversation with your children if a financial event has caused you to change your lifestyle significantly or if you're trying to teach them about responsibilities that come with being financially fortunate.
- Keep in mind that kids learn by getting involved. Whether you're planning a family vacation or budgeting for groceries, consider involving your children. Asking for their input will engage them and give them a sense of financial responsibility. Have them plan a family activity within a certain price range or compare prices at the store.
- If there is tension about money in your household, make sure you frame the resulting conversations in a productive way. For example, if you're feeling stretched by your mortgage payments, rather than lamenting about money woes or stressing in front of your children, loop them in on how you make decisions between your financial obligations and other purchases that are considered "wants." Demonstrate to them what percentage of your income you're contributing to savings and how you budget the rest.
Motley Fool contributor Michele Lerner has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days.