Monday, June 07, 2010

Parents and Kids and Money

So even though I've written on this topic lately, and even recorded a podcast on it (which will come out in a few weeks), apparently I have even MORE to say about finance and money! Lucky, lucky Readers! This time I have a few thoughts to share about how we discuss the family finances with our kids.

When I was growing up, we kids got allowances and had opportunities to earn extra money as I've mentioned. I was about 12 when I started babysitting for money. My mom also ditched the cleaning bi-weekly cleaning service when I was about 15 and hired me to do it instead, for the enormous sum of $35 a week. In high school, my friend's mom hired me to do clerical work at her office, and I worked during most of my undergraduate years, usually around 20 hours a week.

So I, as a kid and young adult, knew about working, and earning money, and learned a few money management skills. That was good, and I'm glad I had those experiences. But one thing I never knew much about was our family's financial situation and how my parents managed their money. I wish they'd shared more information about that, especially once I reached high school.

Once I found a pay stub of my dad's lying on the dining room table and looked at it. It was amazing to me, the amount of money he earned (he's a smarty-farty engineer), and I was equally amazed at how much money he sent to the government. Then my mom caught me looking at the pay stub and yelled at me. It was none of my business to know how much money my dad earned, and that was private information and I was NOT to go blabbing about it to my friends. I was shocked at how much trouble I was in, really, just for looking at something left lying out on the table in a public area of our home.

I think maybe her main concern was really that I'd go telling people what my dad made. However, I was the sort who was pretty unlikely to have done that, and even so, if she'd just asked me not to mention it, I'd have honored that request. But her reaction was so strong, I have often wondered if there's more to it than that. The result of her strong reaction was that I never, ever talked to them about their money ever again, even when I was using their money to go to college (which they freely offered).

My parents rarely spoke to us about their budget, and while they did not deny us the experience of being told 'no' about a great many things, they were very private about their money. just occurred to me that maybe they didn't want to burden us or worry us about money, that worrying about money is something adults are supposed to do, not kids. I get that. That might have been part of it.

The downside of not having this kind of communication is that I had no idea when I was going to college how much debt they were going into on my (and my sister's and brother's) behalf. If I'd had any clue, I would have tried different strategies to get myself through college. Any time I asked about it, they told me not to worry about it, that they were going to put me through college, it was something they'd always wanted to do for us, and that they'd find a way. They'd always had it in their heads that they were going to do this for us, it was VERY important to them. So I let them. Unfortunately, they got into a lot of debt, and once we were all out of undergraduate school, we all ended up taking back a portion our student loans and helped finish paying them off, even though some of them were in our parents' names.

So one thing I resolved to do when I became a parent is to communicate openly with my own kids about our family finances, so they can see what we're facing in our family, and learn, too. Now I don't think it's necessary for all of the children to have a complete picture of our financial portfolio. Even if they could understand stocks and retirement funds, they lack the knowledge and experience to put some of that in context. I can only imagine Ryan's panic should he see some of our investments decline on a down day (or really, the last couple of years). He's eight, and doesn't require full disclosure--yet. I envision a time when that will come, however, probably in their teen years, when they can learn about Time Value of Money and basic investment strategies and even managing credit.

What we do share with them now is that we have financial constraints, that we are trying to be more careful with our money. When much of our money disapparated with a little pop! in the stock market about a year-and-a-half ago (thanks, bipartisan legislators!) Brendan and I began the enormous task of re-evaluating our financial picture and re-formulating a new plan to take into account concerns for the future, such as the inevitable increase in healthcare costs headed our way (thanks again, legislators!), inflation, etc. We've got a new plan, yay.

Explaining about financial constraints, and how to make purchases based on your values, has been really beneficial, for the most part. One of the things I'm doing these days is planning our dinner menu for the week in advance and then buying according to my list and plan. This helps me stick with eating right and keeps our grocery budget in balance, too. So when we're at the store and one of them asks to buy something, I feel free to say "No, I don't think I'll buy that today. I have enough money to buy the things on my list, but no extra money for extras today." Or when trying to make a purchasing decision, I'll speak out loud and often enlist their assistance: "Hmmm...I'm trying to decide between this pork that's on sale and this chicken. I don't have enough money for both today, which one do you think we'd enjoy more?" This models making value-dense choices, and financial planning.

The one caveat to this talking about our budgetary constraints plan--try not to overplay your hand. Apparently, all of this discussion about making financial decisions has caused Ryan to become concerned that we are running out of money and/or are going to the poorhouse. (Yes.) Again, he's eight, and Morgan's five (and tends to ride along on Ryan's coattails of worry sometimes), and it's hard for them to put this stuff into context. We have explained that we are NOT running out of money, and that if we're careful with our money then that's a way we can make sure that we won't run out of money. It was an interesting conversation, and I think it eased their minds a bit. But I have backed off of making too big a deal of it at the grocery store. :o)

And I think maybe that's what my parents were trying to protect us from--worrying about money. I was mildly alarmed when Ryan expressed his concern that we were running out of money--he wasn't especially upset, but he'd been thinking this over in his usual way and coming up with plans (current one: plant our own garden so we can have "free" food!) to mitigate this poorhouse circumstance, etc. But really, his worry and our conversations served an excellent purpose--providing him with more information and context so that he needn't worry, keeping our communication open and unrestricted, and teaching him about money management. This is the kind of stuff I wish my parents had done more of.

We also talk with them openly about how much money we earn. I doubt they could quote you Brendan's last paycheck (maybe Ryan could, I have no clue), but we have never kept that information from them. When I get a check for the cabin, I show it to them and they marvel at its size (not that I'd consider them incredibly large, but to a kid, those checks are enormous!). They go with me to the bank to deposit the checks, and they know about the bills we pay with that money. They know about the bills we pay for our home. If they wanted to, I'd let them sit down with me and help me pay the bills. I don't think they know or really care about specific amounts, but at least Ryan understands that we have to pay the electric company peopleguys because they provide electricity that we use to run the lights, and same with the water company, gas company, etc. Because of this, we can say to them "Hey, we watch most of our movies and tv on Netflix now. It's only $9 a month compared to cable which is $60 a month. We'd like to save some money so we're dumping cable." Okay, they weren't happy about this decision, and we weren't really asking for input (because it's Brendan's and my money to decide about), but they can understand A.) our current movie habits, and B.) do the math. They weren't happy, but they understood our point, you know?

Someone recently asked me about saving for college for the kids, and here is my honest answer: We're really not. Does that sound heartless? It's not. It's more important that Brendan and I save for retirement, especially given how we think the economy is going to go in the next 25 years or so. That is a rationally selfish choice. Now, if we managed to save for retirement and then some and could non-sacrificially pay for the kids to go to school, then we would be more than happy to offer that to them, as a token of our love.

But I don't feel obligated to pay for them through college--not that we won't help out from time to time--but I don't feel on the hook for college. There are many ways for them to get through college: scholarships and "loans" (which they'll probably never have to pay back if this 20 year debt forgiveness thing stays in place!) and working part-time and going to school part-time or on a non-traditional schedule (not between the ages of 18 and 23, I mean). And really, I'm not assuming they'll all even want to go to college.

They have small funds, nothing to go to college on probably, but every little bit helps, I think. Most of it is through UPromise, a great program because you can earn money for college without even trying, and relatives can help, too, by adding their credit cards to our account. So we'll have that for them, but maybe not much else.. And we'll be quite frank with them about what we can and can't do, and what we'd be willing to do for them. I'm learning from my parents' mistakes and I won't get myself into huge debt just to put them through college. I put myself through grad school while working full-time--it can be done, working and college.

So what do you think? Do you share information about your financial picture and decision-making with your kids? Do you think I'm totally off-base? Either way, I'd love to hear your comments! Thanks!


Finance for Kids said...

What a great article!
I want to add that children must be taught about money early on so that they can make wise decisions on their own. Once they do that, parents do not have to worry about children’s money, just as parents do not worry about their child crossing the road safely. Money skills must be taught to their children similarly and their children will have them for life!
A excellent resource for teaching children about money is the Finance for Kidz series of children’s books. These books are written from a child’s perspective. They are really children’s tales with financial lessons weaved into them. You can check them out at

Thanks for a fantastic article.
Prakash Dheeriya, PhD
Father, Author & Professor of Finance
Finance for Kidz Series

Anonymous said...

Hi Jenn,

I enjoy reading your blog. I am surprised, however, by some of the things you say in this post.

I agree with you that you have no moral obligation to pay for your children's college education. But it surprises me that such an education seems such a low value to you that you don't actively try saving money for it. I would think providing my child with a college education would be an enormous value since it is the key to earning a secure job and salary for most people.

Of course, kids can pay for their college tuition on their own, by either working or taking out student loans, but that is a very difficult thing to do sometimes. As a parent, I would think it would be a huge value to me to alleviate the financial burden of paying for a college education so that my child had the time to study properly and not have to worry about this enormous expense.

There are undoubtedly those that can handle school and work simultaneously, but as a parent I would want to make my child's college experience more carefree so that he could go there and do what he is supposed to do- study and excel in the field he chooses.

In sum, I am surprised by your value hierarchy, especially since you homeschool your children, presumably because you take education seriously.

I completely understand that if the alternative is between saving for one's retirement and saving for one's child's college education, then you should of course choose saving for your retirement. But that's not the case: you can very easily put a little bit of money aside for both things every month.

And considering how valuable a college education is for most people, I'd think as a parent I would try to save up for this so that my child could have this experience.

And as a last note, I think a parent finding value in a child's college education is conditional. If the child goes to college and wastes his time, his parent might understandably choose to no longer pay for his education. But when considering whether to save for a college education when the kid is young, I think the potential value of such an education is enough for me to save for it as a parent.

Jenn Casey said...

Thanks for your comments!

Anon, I would like to address some of your points, because I think maybe others might have your concerns.

College is not a low value to me. In fact, I valued by my undergrad and grad degrees very much. If my kids want to go to college themselves, I will support that (and any rational endeavor that they choose for themselves throughout their lives).

By the time they are college age, they will have many more options to get through school than my husband and I will to retire (especially if our savings are depleted by the government). In 10 years, Ryan will be 18 and maybe ready for college. In 10 years, Brendan and I will be 49.

I'd rather use that money over the next 10 years to build up that much more of savings for our retirement--we'll be closer to retirement (still many years away of course) and Ryan will have his whole life ahead of him. Should he choose to go into debt to pay for college, he will have 50 years to pay off that debt (his working life) as opposed to us taking the next 10 years of savings from our retirement to pay it for him.

Those 10 years of compound interest will make a huge difference in Brendan's and my quality of life as we get older, especially given how we think the government will be more and more involved in healthcare (Brendan has a chronic illness too and we are very concerned how government-controlled healthcare will affect his ability to get meds) and retirement.

You wrote:

But that's not the case: you can very easily put a little bit of money aside for both things every month.

That IS the case. We are not saving as much for retirement as we ought to and we need to save more. We cannot easily put money aside for both (or in our case, all 4 things--retirement plus college for three).

Clark Howard has some good info on this issue:

I think their college should be a value to them. They will be old enough to begin their independent lives and get themselves through college. No, it won't be as easy as it would be if someone else paid for their college. But I don't think working during college is necessarily a bad distraction from pursuing your goals (I know this from experience). And if they want to go to college unencumbered by a job or debt, then we'll make sure they know what they need to do in order to obtain scholarships. I see providing them with this information and helping them make their decisions as my parental obligation, rather than paying for college.

I do value education, as you said, which is the primary reason we will do almost anything we need to do in order to keep them out of government school. They are young and dependent and in this way we are currently fulfilling our moral obligation to them in the best way we know how. If I wanted them to have big college funds, I'd stick them in government school and get a full-time job--but at what cost to their education, independence? No way. Better we keep them home now and make them work for college later than the other way around I think.

As I said, if we can help them out in a non-sacrificial way, we will be MORE than happy to do that. To put money aside for three college savings plans now would be sacrificial given our current financial state and so we are not doing that, and I don't really feel all that bad about it. Because I firmly believe we are doing the best things for ourselves AND for them in the long run.

Anonymous said...

Hi Jenn,

Thanks for your response. Like I said before, I agree with you that there is no moral obligation to pay for one's child's college education. I guess I just differ from you in my value hierarchy. I don't have kids myself, but when I do, I think I'd want to try to pay for their college education as much as I could and if this meant a slightly lower standard of living after retirement, I'd consider that a worthy trade-off.

Of course, every situation is different and you have to evaluate yours based on your context. You have three children, so perhaps the trade-off for you would be much greater than the trade-off for a couple saving money for just one child.

On an unrelated note- you suggested that government schools would hinder your children's independence. Why do you think that? I ask because obviously many people who have gone to public school are intelligent, independent thinkers. And if a child had parents who saw the value in independent thinking, it is likely that even in a government school the child would turn out fine because the parents would presumably work with the child themselves to help him develop the proper skills.

Kelly Elmore said...


There are many of us who were raised very religious. Clearly, we survived and turned out pretty okay (though we all have issues to work through from that experience, I am sure). However, just because I survived with my mind intact, does not mean I want to raise my children in the church. I see the same argument applying to public schools. I went to public schools and survived, but being the typical American dreamer, I want my kids to have better.

Anonymous said...

Hi Kelly,

I understand wanting more for one's children, but clearly public school is not *as* bad as going to church. Further, clearly public school is not as sure to warp your child's mind as is actively going to church where they preach for you to shut off your mind.

Plenty of kids go to public school and do great things afterwards. I think it's unfair to suggest that one's children will be somehow less independent because they went to public school.

Of course, you have the right to educate your children however you please, whether that be private school, public school, or homeschool.

But let's get real...public school definitely has its problems but it isn't *that* bad.

Jenn Casey said...

Sorry about getting back to this so late!

Anon, you wrote:

I think it's unfair to suggest that one's children will be somehow less independent because they went to public school.

One of the reasons I'm keeping my kids out of any school (government or private) is because I think learning at home--how ever you do it--is inherently more conducive to the development of independence. That is not to suggest that kids who go to school won't ever be independent--of course that's not true.

But homeschooling, at least the way we do it here, is extremely integral in how my kids are developing into independent human beings. They are vastly more free than their schooled-peers to make choices throughout the day. I believe that the more practice a child has in making value-based choices, the more skilled he will be in this very important area of life by the time he's an adult. Some choices my kids make on a regular basis that schooled kids do not: when to eat, what to eat, when to use the bathroom, which book to read, which math game to play on the computer, how long to spend on such activities, etc.

In a school setting, there are necessarily more limits placed on the children due to the nature of school. My children will not have limits such as needing to ask permission to use the bathroom--and that's a necessary (though perhaps small) limit that needs to be in place in a large group setting, for everyone's sanity I would imagine.

What I'm saying is not "only homeschooled kids will be independent." What I'm saying is that homeschooled children have more freedom and fewer limits than children in a classroom setting.

I hope that clarifies what I meant in that paragraph.

And for the record, yes I think government schools ARE *that* bad. Things have changed much in recent years. If you don't have children, you may not be aware of the extent of these changes.