Should your kids know your salary?

Amy Oztan and her husband, Omar, are trying to teach their 7-year-old son, Jake, about the importance of money. Jake, who lives with his parents in Brooklyn, gets $7 a week in allowance -- up from $6 last year, when he was 6 -- plus extra money if he helps out around the house. "We're trying to make him understand that he can have things but he has to work for them," says Amy, the owner of filminginbrooklyn.com.

Parents 'don't get an allowance'

Which is not to say he has a full grasp of what work is: Although he understands that his father goes to work every day, he's not sure what he does. "Sometimes he rides his bike and sometimes he comes back really sweaty," says Jake. (Actually, his father is a securities lawyer -- although that could indeed account for the recent sweating.)

The question of how much -- and how -- to talk to kids about finances stymies even parenting experts. Do kids need to know your salary? What about family financial difficulties? Or should we let our children continue in blissful innocence, unaware that problems exist?

Mom: Never say it's too expensive

Most people agree that parents must talk to their kids about money. They just can't agree on where to start -- or what exactly to say.

Quiz: What are your parental priorities?

Leslie McKee, a professional organizer in Pittsburgh, recalls the four little words her mother used to utter when Leslie was a child wanting something special: "We can't afford that."

"Usually there would be no conflict," recalls McKee, 46 and now the mother of Logan, 16, and Caylin, 18. "But often the object of my desire was something small, like a cookie, and I often wondered how we could have such a nice home and not be able to afford these little things. It unnecessarily instilled a sense of deprivation, because truly the phrase was used to avoid discussion rather than to portray an accurate picture of our finances."

Like many people, McKee wanted to handle things differently with her own children. To reinforce her kids' sense of security, she says, she wants to instill the idea that the family has enough but sometimes chooses not to purchase items.

"I prefer to simply say that I do not want to purchase an item or that I don't want to spend my money that way. Yes, this puts the bull's-eye squarely on my forehead . . . (but my) kids can walk through life with the feeling that there is 'enough' -- and (know) that they are in control" when it comes to spending decisions.

A millionaire's advice to his daughter

Mind you, disclosure only goes so far.

McKee never knew exactly how much her parents earned, nor does she tell her kids about her salary. "They have a sense of what we make -- I work on an hourly rate -- so they know how hard it is or how easy it is to make a certain amount of money, and they know when I get a big client," she says. "But as far as saying 'this is what we have' . . . I just don't feel the need for there to be any global comparison on what our bottom line is."

There are ways to simplify things without creating too much drama, particularly when you're talking to small children, says Tina B. Tessina, a licensed psychotherapist in Long Beach, Calif., and the author of "Money, Sex and Kids: Stop Fighting About the Three Things That Can Ruin Your Marriage." For instance, she suggests, you might explain a change in living situation by saying: "The house got too expensive for us to live in, so we're moving to what we can afford."

"It's very helpful if your children, as they grow, learn first what money means, how much it costs to buy things, how the money to buy things is earned," Tessina says. "By the time they're teenagers, they should understand all the aspects of your household finance, and how the business aspect of marriage and family works.

"If you teach them about financial issues in general, and talk about what's on the news -- such as what's happening in the housing market today or big corporate layoffs and what that means -- they can gain some understanding about how people can have problems with money and how to keep themselves financially safe. Then, when something happens in your own financial life -- a rise in mortgage payment, loss of a job, budget problems -- they will have a basis to understand it."

But Aaron Cooper, a clinical psychologist and educator with The Family Institute at Northwestern University, shares McKee's belief that children shouldn't be burdened with financial worries. "It's best for parents to acknowledge, when rocky times hit, that the sea is a bit bumpy these days but that they have it under control, that they will do whatever they need to (to) take care of the family and keep the boat on course," he says. "This gentle acknowledgment allows the kids to trust Mom and Dad . . . and the message that someone's at the helm is all the kids really want to hear."

And Diane Terman, co-author of "The Money Club," says parents should absolutely, unequivocally avoid discussing specifics with their brood. "The issue of money and saving and preparing and being aware of the future and having a responsibility to yourself is important -- but not the amount," she says. "It is not to be discussed unless it's mandatory -- if illness arises, or there's a drastic accident or catastrophe. But otherwise . . . amounts can change. What if kids knew what the amounts were and then they looked at the stock market today? It would be all wrong."

Many of the differences boil down to generational shifts.

For instance, a study conducted by Charles Schwab earlier this year found that older respondents -- a group Schwab called the "Silent Generation," ages 63 to 83 -- said the most important lessons parents can teach their children about saving and investing are to live within your means and to begin saving at an early age.

On the other hand, Generation Y respondents -- 21 to 31 years old-- said more than any other generation that learning to invest wisely is the most important lesson.

However, across the board, more than half of parents surveyed said they don't teach their children about saving and investing because they don't believe they have enough knowledge to do so.

Suzette Flemming, a business consultant in Great Falls, Mont., doesn't want to be in that majority. "I think how we handle money and talk about money greatly influences how kids perceive it and spend it," Flemming says. Although she and her husband don't get into the details of their salaries with their children, "it's important to tell kids when you can afford something, when you are saving to do something and when you can't afford to do something. That helps them understand that money doesn't grow on trees and you can't always have what you want."

She and her husband also enforce fairly rigid financial rules with their kids. For example, each child has a chore chart and a specified weekly allowance. If an assigned chore isn't completed by Friday evening, the child loses a certain chunk of allowance for that chore. And although her children, Cheyenne, 13, and Dallas, 11, are allowed to spend their allowance however they wish, they must also save to buy their friends birthday or Christmas presents.

"We try to provide guidance, as some purchases aren't worth the money, but ultimately it's their choice," Flemming says. She and her husband also have a strict policy on credit: "We also don't let them borrow against the next week's allowance."

For families with money, there's a different challenge: how to keep kids from thinking that they won't have to work. "I raised five kids and we never discussed the family money -- mainly because we didn't want the comfort of family money to rob them of finding their own unique purpose in life," says Lisa Brock, whose family set up trust funds for her children (now ages 20 through 30).

But Brock, a small-business owner in Tampa, Fla., did talk to her kids a lot about money in general -- how to grow it, what interest and compounding were and other basic financial concepts. "When they saved varying amounts, we then went to our credit union and opened CDs, and then when they had a few CDs, we went to our broker and had accounts opened for them so they could see, through their own eyes and with their own resources, how money works," she says.

She, too, avoids telling her kids how much money she and her husband have.

"It has nothing to do with them," she says. "They understand they grew up in upper-middle-class homes -- but I tried to have them understand that being rich doesn't necessarily correspond to money."

And as for young Jake Oztan of Brooklyn: He's not so sure about what his parents earn.

There's one thing he does know, however: "They don't get an allowance," he says solemnly.

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Produced by Elizabeth Daza / Graphics by Sean Enzwiller

Published Oct. 17, 2008