Are We Rich? (How to answer kids’ money questions)

How much money do you make?

Why is your house so small?

Are we rich?

Kids can ask some tough and straightforward questions. They can also have a fairly accurate BS detector. So, even though 8-year-old Johnny cannot comprehend the difference between $8,000 and $80,000 he expects and deserves a real answer to his questions about money.

Of course, the age of your child determines how much information you’ll share. You want to give your child accurate information without causing them to worry.

When a very young child asks how much money you make or if you are rich tell them the truth on terms they’ll understand. For example, you might say something like “We make enough money to pay our bills and do fun things.” If you have an older child this is a perfect opportunity to teach them about the costs of running a household. Sharing your budget that shows how income is distributed among expenses, savings and discretionary spending helps put things into perspective for teens.

If your finances aren’t so good right now, don’t try to gloss it over with your children. Again, be honest, but be careful how much you share. It’s fine to tell your children that money is tight, but reassure them that your love will help you get through tough times. Kids will typically want to help in saving or bringing in more money. Encourage this no matter how small the contribution. Also, curb your financial stress in front of the kids and spend as much time possible doing fun and free things together.  My kids and I used to go to a different pond or lake every Friday evening in the summer with a cooler and fishing rods. Secretly, I was always glad when they didn’t catch anything—so good times.

Managing money is all about choices. Once my son’s friend came to our house and after walking all said, “Where’s the rest of your house?” I was dumbfounded, but told him that we liked our house and it was the perfect size for us. Kids, like the rest of us, will always compare what they have to others and they’ll want everything that they see. So, if your child is insisting on having some specific brand of clothing or toy and you disagree you might say, “If we buy XX brand shoes for you, we would have to take money from our fun money. Then we couldn’t go to the amusement park. I don’t want to miss out on having fun with you.” Explain the choice, but don’t let them make the choice.

There is no way to prepare yourself for all the questions kids will ask about money. They are bound to surprise you. But, always keep it honest and conversational. If you begin lecturing, you’ll turn your child off. The questions might stop, but so will his or her opportunity for learning.

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