Should You Tell Your Kids How Much Money You Make?

Everyone seems to agree that parents are their kids’ primary teachers when it comes to money. The results of a recent Citibank survey to mark National Financial Literacy Month are typical: 70% of parents said their children learn about money by watching them, and 59% said the kids learn by talking about money together. Nevertheless, nearly half of parents feel that some subjects are off-limits. Heading the list of taboo topics: how much money they make.

Parents’ reluctance is understandable. No matter how much you make, whether it’s $30,000 or $130,000, kids will have trouble putting it in perspective. And you have a right to your privacy. You can’t be blamed for not wanting your affairs blabbed around the neighborhood -- which your kids are likely to do, if only in innocent conversation with friends.

But you can handle this touchy subject in an age-appropriate manner without feeling awkward or spilling too many beans.

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Elementary-age kids. Young children aren’t looking for a dollars-and-cents accounting of your balance sheet. When they ask questions about your income, they’re really fishing for a general idea of how you’re doing. They want to know that the family is not at risk of being turned out into the street.

So when your 7-year-old blurts out over dinner, “How much do you make?” keep calm and don’t overreact with an immediate, “That’s none of your business.” Instead, give a vague but reassuring reply, such as “We have enough to buy the things we need and save for the future,” or “More than some families and not as much as others.” (Of course, the situation is trickier if your family is struggling financially, but that’s a subject for another column.)

You might also turn the tables and ask your child what made him ask the question. He may simply be fishing to see if a new bike is in the cards. (See Saying No to Your Kids and Saying Yes to Your Kids.)

Middle- and high-school students. As your children get older, you may choose to be more forthright about how much you earn. But it will make more sense to your kids (and be more comfortable for you) if you put your income in context. Kids need to know, for example, that taxes take a bite out of your salary. They also need to know that you have to cover certain fixed expenses every month, such as the mortgage and the car insurance.

A number of years ago I appeared on the Oprah Winfrey Show with a mom and dad who were giving their two teenagers a lesson in family budgeting. Sitting around their kitchen table, we went through an exercise in which the parents produced their actual monthly bills and the kids paid them with a stack of play money. When all the bills were covered, the mother gathered up the remaining $500 on the table. “That’s for groceries,” she told her wide-eyed kids.

As teenagers get ready to apply for college, it’s important that you tell them beforehand how much you’ve saved to pay tuition and other expenses, how much they’ll be expected to cover, and how much your family can reasonably afford. For more, see Get More Financial Aid for College and How to Keep Student-Loan Debt Under Control.

Young adults. Now’s the time to be more open about your finances. Your children need to know whether you’ll be able to finance your own retirement, whether you’re planning to help pay college bills for the grandkids and how you plan to divvy up your estate. And they need to know who will handle your finances if something happens to you.

If you’re uneasy about having this conversation, or you anticipate that your children will be uncomfortable or your wishes won’t be well received, consider having a third party, such as your lawyer or financial planner, get the ball rolling on your behalf.

Just as you did when the kids were younger, you can take things step by step, and you don’t have to use numbers right away. You might say, for example, “We’ve saved for 15 years of retirement at our current standard of living, and we have long-term-care insurance if necessary.” Even grown children are looking for reassurance -- or a heads-up about what they may be called upon to do in the future (see The Family Money Talk You Must Have).