Money and puberty: Equally difficult topics for parents?

April 02, 2012

| MoneyRates.com Senior Financial Analyst, CFA

Is money really as difficult to discuss with children as the facts of life?

A new study by T. Rowe Price suggests that many parents have trouble talking to their kids about financial matters. For example, 28 percent of adults questioned for the Parents, Kids & Money Survey said they find it difficult to talk to their children about investing -- a percentage similar to the 29 percent who find puberty a difficult subject to broach.

Here are some of the other disturbing highlights from the study:

  • Nearly a quarter of all parents seldom or never discuss financial matters with their children.
  • 77 percent of parents are not truthful about money at least some of the time.
  • Less than half of all parents give their kids a regular allowance.

This survey should act as a signal to parents to start teaching children more about money, and the basics are an excellent place to start.

Four financial essentials to discuss with kids

At minimum, there are four financial lessons parents should be sure to teach their children:

  1. Setting savings goals. The great thing about this topic is that parents can start with something simple and specific in the child's life, like saving for a new toy. As the child matures, parents can start to explain how they are continually juggling an ever-changing set of goals in order for the family to have basics like a home and a car.
  2. Managing household expenses. Parents should list all their monthly expenses, and show their children how all the things they may take for granted -- electricity, water, cable television, etc. -- have to be paid for on a regular basis. Explaining how this is done, and how to manage a checking account to provide for these things, will not only teach children fundamental life skills, but it may give them more of an appreciation for everything their parents put into the household.
  3. Long-term planning. As a child enters high school, it's natural to start talking about colleges, and financial issues should be a major part of that discussion. Parents can explain how they plan on affording college, and then broaden the lesson to talk about other forms of long-term planning, like retirement saving.
  4. Using credit responsibly. Around age 18, children can expect to start receiving credit card offers, which makes this an important time to talk about how credit terms work, and the importance of living within their means.

Naturally, there are many more topics parents could tackle, but the lessons above are crucial for enabling children to manage their affairs successfully once they become adults.

Whatever financial topics parents choose to discuss, perhaps the most important thing is to be truthful. The T. Rowe Price study suggests that a significant number of parents have a hard time being completely forthright with their kids about money matters. But in that effort to avoid an awkward conversation, those parents may be really shortchanging their children.

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