What your kids want to know about money

Every parent knows children can ask the most disarming questions which can leave you laughing, crying, embarrassed, angry, squirming… or all four at once.

Whether it’s questions around looks, sex, death or money, children don’t have a filter in their enquiring minds. But your first response can often set the tone for an answer which can have a huge impact on your child’s future opinions and behaviours on the subject.

With four grown up children and 5 grandchildren, we’ve been bombarded with an enormous range of questions about life and money. So how do you answer those tricky financial questions when they come up.

Rather than stumble around thinking about what to say to a confronting question, we always had a universal first response… “why do you ask?”

Not only did it buy us time to think through our response, the answer would put into context why the question was being asked. Often a parent’s brain is so conditioned to answering questions from adults that we tend to over complicate our response when a child’s reason for asking can be very innocent and simple.

In the past any discussion about money with children was seen as grubby, one of those taboo topics never to be discussed. It produced young adults ill prepared in simple matters of money management which often led to some very expensive mistakes.

Our fear is that the pendulum may have now swung to the other extreme where children are too exposed to the strains of the family finances with the risk that they will grow up to fear money and making mistakes. So, like everything, it’s a balance between sharing too much about your finances and satisfying an enquiring mind which will also absorb healthy financial habits. Naturally how much you reveal to children depends on their age.

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Q; Are we rich? A; Tell me what rich means to you?

A child’s idea of rich can be quite different to ours. To them it is mostly about size and material objects. A big house, a flash car, a swimming pool, can be seen as a sign of being rich.

There is no need to give a definite yes or no answer. Explain that you have enough money for a house, clothes and food. Then steer the conversation toward the theme that being rich isn’t as important as other qualities such as being kind to others, being polite and being healthy.

Q; How much money do you make? A: Enough to care for you and the family.

The number really isn’t important to a child because they will have no idea of the context. Remember their benchmark will be their pocket money.

But your answer is a great excuse to explain how you need to earn income to pay for the expenses of the family.

Show them what their pocket money would buy and then go through your weekly household budget (at an age appropriate level of detail) to give an idea of what else needs be paid. Explain you need to earn enough to pay for all these expenses and have a bit left over for things like holidays and eating out.

If they start to get bored then you know they aren’t quite ready for the full financial field trip. But if they’re still intrigued then go further.

The first time we took our kids through our supermarket bill and compared it to their pocket money brought gasps of astonishment. It showed day-to-day items, which are often taken for granted, do have a value and shouldn’t be wasted.

We would also break down the cost of an item into how many hours they’d have to work at McDonalds (all our kids had part time jobs at McDonalds) to pay for it. The message really sank in.

Drag them along shopping and show that consumers have choices. That big brand names are often more expensive but not necessarily better. That supermarket prices are usually more expensive at eye level on a shelf than above or below. Take them shopping and treat it like a field trip and pass on your canny shopping tips.

For older children go through your on-line banking and explain what a financial institution does, the concept of earning interest and the difference between the range of accounts. The same with the credit card statement. Explain that bit of plastic isn’t a money tree and it has to be paid back, often with interest. Whip out the debit card and explain the difference.

Q: Why does my friend live in a bigger house than we do? A: I don’t know, but why is that important?

Always admit the obvious… that other people do have bigger houses… and that it’s okay to be different. Explain people think differently, like different things and have different priorities.

They may like a big house instead of going on holidays or eating out. Or they have been given the money to buy a large house or borrowed more to own it.

Some people choose jobs to earn more money to buy a big house while others choose a job which makes them happy rather than get paid a lot.

Explain you have a job which makes you happy and can pay for a house like what you have now.

Q: Why can’t you have a job that makes more money, so we can buy more things and go on holidayA: This is the job I love and you wouldn’t want me to do a job that made me grumpy and unhappy?

This is one of those questions which can rip your ego to shreds and make you feel incredibly inadequate. While the question feels aggressive don’t answer it that way.

It’s a perfectly normal question for a child to make in an ever increasingly materialistic world.

It’s a chance to explain your family priorities which aren’t all centered around money and material possessions. It’s about love, being a family and enjoying the simple things in life.

Go through your values and how you set financial goals. Explain that you cant have everything and sacrifices have to be made to pay for things like holidays. Remember when everyone’s having a good time on vacation, remind them of the little sacrifices which had to be made to get them there and it’s worth it.

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