There was an interesting debate in the Wall Street Journal recently in which two personal finance writers squared off on the question in the headline of this post.
Manisha Thakor, author of “On My Own Two Feet,” among other personal finance books, favors full financial disclosure—not all at once, of course, but over time and within the context of wide-ranging financial discussions about saving, spending, taxes, financial values, and more. Plus, she said, parents should be intentional about discerning when a child is capable of handling such information responsibly.
“The most vital part of this disclosure is explaining how your income figures relate to the cost of maintaining your household, so that your teen understands not just how much you make but how you manage your money. This is something that can’t be achieved nearly as well by talking in broad terms about finances without disclosing the actual figures involved.”
Thakor believes there’s a potential danger in withholding such information. “Not disclosing parental salaries…perpetuates the notion that money isn’t something to be talked about openly… Transparency—and the understanding it allows—is a key way parents can equip their teens to make smart financial decisions in the future.”
Beth Kobliner, author of “Make Your Kid a Money Genius (Even if You’re Not),” said your kids are “better off not knowing” how much you make. As she explained, “without a thorough understanding of economic subtleties like the cost of living, family size and your tax burden—subtleties that teens, and especially younger children, probably can’t totally grasp yet—your salary is just an abstract number.”
In fact, Kobliner thinks sharing your salary with your kids could be harmful. “Does a big number make them feel like they should keep up with the Kardashians, with all the wild spending and borrowing that suggests? Will a lower one make them feel ashamed, especially if they think it’s below that of their peers’ parents?”
Kobliner believes your household income should be kept from your kids until their senior year of high school when they may be applying for college and financial aid.
There were no research studies cited by either author; they were simply giving their opinions. Here’s mine.
I favor sharing more than less. It’s been my experience that kids can grasp more than we sometimes think they can. Disclosing information about our household’s finances helps them understand the real world of money and tells them we trust them with that information.
I do think that context is essential, though. A salary figure without any understanding of what things cost won’t be very meaningful. I remember reading about a family that went to the bank and withdrew cash equal to their monthly income. They made sure to get the money in fairly small denominations so when they dumped it on the dining room table in front of their kids, it made quite an impression!
To the kids, it looked like all the money in the world. But then the parents started pulling out various amounts for each of their bills—food, clothing, insurance, gasoline, utilities, and on and on. That, too, made quite an impression, helping their kids see how quickly the money goes. It led to some great discussions about needs vs. wants, making trade-offs, and saving for bigger ticket items.
We haven’t done that—yet. But I think it’s an interesting idea. I’m a big believer in making things as real as possible for our kids.
One step we’ve taken in this direction is giving our kids a monthly clothing budget that they have to manage. We may start having them pay our household bills online (with our supervision, of course), so they can get a better sense about what we spend on water, electricity, and so forth.
Start a conversation
A 2018 T. Rowe Price survey of 18-to-24-year-olds found that 40% thought their parents were reluctant to talk with them about money when they were younger. One in seven said their parents never talked about money with them.
If you’re hesitant to talk with your kids about money, why? Are there aspects of your financial situation you need to clean up? Let the prospect of talking with your kids about money motivate you to take action, whether that’s about getting out of debt, building savings, or living more generously. Even if you’re not talking with your kids about money, they’re watching, listening, and learning more from you than you may realize. Let that, too, be a motivator to work on your own finances.
How much have you talked with your kids about money? Have you told them how much money you make? Why or why not?