After raising three children, I know first-hand that kids ask tough questions about money. Whether it was a 15-minute chat at bedtime or on a long road trip, I enjoyed these discussions. These teaching moments presented an opportunity to pass on life lessons about handling money and instill financial wisdom that could be useful later in their lives.
On long road trips, we often played “the question game.” We’d go around the car in clockwise order asking a question. The next person had to answer the question with a question or they were out of the game. I’m not sure that they caught on, but I’d often use this same technique when it came to money questions. You can start by asking them questions for clarification. After all, “why do lawyers always answer a question with a question?” Answer: “why shouldn’t a lawyer answer a question with a question?” It gets them thinking.
While you want to be forthright with them, you both learn more by asking questions. This gives you perspective on why they are asking and helps them develop critical thinking skills. Consider these types of clarifying answer questions:
- Why do you ask?
- What do you mean by that?
- What does “rich” mean to you?
- What do you think you’ll do for work when you get older?
- How do your friends spend their money?
Even with the best questions, you’ll still want to be prepared with some answers of your own. Think of answering honestly, but age-appropriately. Here are some of the more common questions we hear:
Are we rich?
Explain that being “rich” means different things to different people and that you are very fortunate to have the resources that you do. This is also a great time to remind them that wealth is not the only indicator of happiness or success and that you value many other things in life such as our relationships, experiences, and personal growth. I always loved to remind them that the most valuable things in life are not really things, but the relationships we develop with family and friends.
Can I have (expensive item)?
Explain that even wealthy families have budgets and that not all expenses are justifiable. You can also use this as an opportunity to discuss the importance of making wise financial decisions and understanding the true value of money. I recall teaching moments when one of my children wanted the more expensive brand to which I told them they could use their own money to pay the difference between the less expensive equivalent item and the more expensive name brand item. They would then reflect on whether they really needed or wanted the more expensive item.
How much money do you make?
“None of your business” is a possible response, but not the appropriate one. Disclosing a number isn’t usually wise either. My career and my investments allowed me to honestly say that my income varies greatly year to year. But I would also explain that most adults usually don’t share how much money they make. You can also use this question as an opportunity to talk with your child about the importance of a healthy relationship with money. Understanding its role in our lives can help them make wise decisions as they grow up.
Why can’t we go on a big vacation like my friend’s family?
Explain that different families have different priorities and financial situations. While it may not be possible to go on a big vacation at the moment, you can focus on making other fun memories and experiences together as a family.
How much does our house (or car or vacation) cost?
It’s not necessary to disclose the specific cost of your assets. You can explain that owning a home is an important investment and that you are working hard to make sure it’s a safe and comfortable place for your family to live. Also, the cost of an asset can change significantly year over year. This discussion can also lead to a discussion about the value of an asset, time value of money, and interest rates.
Can I have an allowance?
If you decide to give your child an allowance, explain that it’s important to use it wisely and to save some of it for future goals. You can also talk about ways they can earn extra money by doing chores or other tasks around the house or for neighbors (childcare, mowing the lawn, washing the car, etc.).
What would happen if you lost your job?
It’s important to reassure your child that even if a challenging situation were to arise, you would find a way to get through it together as a family. Additionally, it can be helpful to use this as an opportunity to teach your child about the importance of saving money and having an emergency fund, as well as the value of resilience and adaptability in the face of adversity.
Remember that the key to answering tough money questions is to be honest, open, and sensitive to your child’s age and maturity level. By having these conversations early and often, you can help your child develop a healthy and positive relationship with money that will serve them well throughout their lives. While it’s never too late to have money discussions with your children, I found that by having these discussions with my children in their early years, the money related discussions in high school and adult years continued on a more sophisticated level, including how stock markets, bonds, debt, and credit cards work, contributing to retirement accounts, a strategy for saving for a home, and the importance of having a financial plan.