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. Hmmm...it 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!