Teaching Children About Money By Sharing Your Financial Information

by Neal Frankle, CFP ®

Do you share financial information with your family? Is that the best method for teaching children about money? How much information should you share? I personally think it’s very smart to include children in the financial reality of your family’s situation as soon as possible. Here’s why:

  1. It dispels the notion that money grows on trees.
  2. It demonstrates that you can create your own financial future.
  3. It proves the value of work.
  4. It teaches the importance of mindful spending and budgeting.

There is no question that your children can benefit quite a bit when you involve them in your financial affairs. But what about the costs? If you are currently struggling financially, your kids might worry if you tell them too much. And if you are doing well, your kids might not learn the valuable lessons above. Where is the balance?

My wife and I decided that we’d open up our financial books to our kids at a relatively early age. While they were in middle school, we started speaking more freely about our situation and in high-school we were even more open about finances. We even gave them a copy of our personal cash flows statement. The outcome has been excellent.

Our kids see my wife and I work hard. They also see the results of hard work. That is exactly what we wanted. Now, you may think I’m nuts but I even send my kids a copy of our actual spending for the month every month. I think this is the most powerful thing we could do and I encourage you to follow our lead.

First, your budget gives your children a frame of reference for spending. They see what you spend every month to keep them in school, keep food on the table, a roof over their heads and clothes on their backs. Because they know what these things cost, they won’t pressure you to spend in other areas that aren’t necessary. That’s because they have a sense of proportion.

In our case, this proportionality spills over to their professional choices as well. While neither of my college-age kids are solely focused on finances, they have chosen career paths that will enable them to make a living. Me likey.

As far as the concern about children worrying about money prematurely, I have some news for you. If things are tough at home the kids know it and feel it. If anything, you’ll do them a huge favor if you simply tell the truth and put everything in perspective. Believe me; the “truth” they make up about your financial situation when things are tough is far worse than the reality of it.

So there you have it. I suggest that you start including your kids in your “State of the Family Financial Address” in middle school. And by the time they attend high school, I suggest you distribute a copy of your budget and spending. Also, do a year end review and include them in the process.

Black Belt Level

Once my kids went away to college, I started sending them a profit and loss statement and a balance sheet. These documents are the cornerstone of our family financial planning. This opens up the discussions about saving, investing and retirement. I can’t think of a better way to introduce these concepts. They start to see the balance between spending, assets and income. They also understand why it’s important to save. They see savings as a way to achieve long-term financial needs rather than simply satisfy an appetite for immediate spending.

I’m really happy with the results so far. But what has been your experience? How much financial information do you share with your family? Why or why not? What has been your experience? How do you discuss your personal and general economic conditions with children?

Carnivals we participated in this week:

Investing Answers hosts Carnival of Personal Finance

Carnival of Wealth



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