Sharing family finances with kids: strike a balance

Children usually don't know how much money their family has, but they can make comparisons. One child knows that his family can't afford a pony or a swimming pool, but it always has enough for new school clothes each year. Another measures her family's finances by the long wait for the downtown-bound bus.

Other children believe they can have anything they desire. Why not? They always have.

Parents want their kids to have it easier than they did. But some, in an attempt to shelter their children, keep them in the dark about family finances.

A lot of parents tend to overprotect their children, says Richard M. Thornton, associate director of the Center for Economic Education at De Paul University in Chicago. This can lead to economic dependency, he says, as the child looks to the parent for money long after he leaves the nest.

``It's never too early for kids to learn about money,'' Mr. Thornton says. The center at De Paul develops programs, assembles course material, and obtains speakers to teach children in area schools about money.

Trying to keep family money problems from a child may cause him more anxiety than if he were told the truth. He knows something is wrong, and may think it is his fault that daddy no longer smiles at him. A delicate balance can be struck between little or no knowledge and too much knowledge.

Yet some people try to share more information with their kids than they can handle, says Loren Geistfeld, professor of consumer economics at Ohio State University, Columbus. A money problem that may be minor to an adult can sound very serious to a child.

One piece of information that is rarely shared with children is the family income. It is often a taboo subject, especially in middle-class or wealthier families. Feelings of the parents' self-worth are tied too closely to monetary reward.

There is good reason for not telling small children your exact income. Large numbers are incomprehensible to them, and they have a tendency to tell those numbers outside the family.

Some parents work on a ``need to know'' basis. They feel that no purpose would be served by giving their kids certain information. This protects their personal privacy. They may also be afraid the youngsters will criticize the way they spend their money.

``If they [the children] heard the parent earned $25,000 to $30,000, it would totally blow their minds,'' says Mr. Geistfeld.

What the children don't see is the way the cost of operating the household drains away what they may consider a large fortune, he adds.

Some parents discuss family economic choices with their children.

Giving children some say in choices that will affect their lives gives them a stronger feeling of control over their surroundings. Questions like ``Should we go to the seashore or the mountains, or stay home and buy a new car?'' are asked, then answered by all family members.

Even younger children can understand what kinds of things the family can afford without getting involved in exact numbers. Kindergartners can learn that it takes a job to make money, that they need money to buy things, and that they have to make either-or economic choices, says Thornton.

Carol Anderson, a mother of six in Amesbury, Mass., tells her children, ``If you'd like to go to the beach, then we shouldn't buy this or that toy.''

A child who sees his parent just writing a check or using a piece of plastic to buy something may not appreciate that one or both parents are going out into the marketplace to earn the money being drawn upon, says Geistfeld.

If parents don't point out where the money ultimately comes from, preschoolers may think that money is printed out from automatic teller machines by magic. Mrs. Anderson explains to her kids when she writes a check, ``This is a piece of paper that says, `I will give you this money.' ''

Lessons abound in ``what the family can afford.'' Geistfeld relates the story of a youngster who wanted new furniture. She was told that she would have to sell her old furniture to get the money to buy new furniture. Before she sold her old furniture, she went shopping for the new furniture with her parents. She was very impressed with the cost of the new furniture, learning more than if her parents had just gone out and bought her the furniture.

Although even teen-agers are rarely told the family income, they should have a ballpark figure in mind. The closer they come to career choices, the more they need to know about how much income is needed to support their current or desired life style.

Otherwise they may be rudely awakened trying to imitate a $50,000 ``designer'' life style with an income of $10,000 and credit cards.