Talking To Your Kids About Family Finances

Father Helping Two Daughters Sitting At Table Doing Homework

Family Finances – In The Light Of Parenting

Parenting is certainly no easy feat. Throughout the journey of raising your children, you will hear extraordinary questions—from extremely silly to surprisingly technical —which you may not have answers to. Or perhaps, you will feel reluctant to answer them. When it comes to children, there is no definite playbook instruction manual that can teach you the precise way to handle tough situations. Even the parenting manuals that are written by the smartest people in the world can never guarantee you 100% positive results. Two of the toughest conversations that give parents cold sweats are telling your kids about family finances and telling your kids about the birds and the bees.

Undoubtedly, both discussions have their repercussions as kids don’t have the brain power to completely understand them yet. Being a parent, it is your duty to learn wise answers to spontaneous questions in order to tackle difficult situations. It’s a tough job, no doubt.  However, as a parent, we must establish ourselves as steady and honest mentors in our children’s lives. Plus, building a platform of strong and effective communication with a conclusive dialogue is critically important. Your kids deserve to know the truth, but sometimes the truth needs to be watered down a bit for their minds to wrap around it.  As a parent myself, I know how hard this can be.  

Managing the Resources at Disposal

Not every family is privileged enough to have an exorbitant amount of finances, which means that they have to stay within a budget that they have defined each month. Along with money constraints comes natural worry and concern. And, that worry mostly revolves around managing your family and kids. Moreover, young children aren’t always capable of understanding the clear picture of the family finances. Those who do understand are either older, incredibly smart, or have a brilliant sense of evaluating things on their own. However, it’s important to let kids be kids.  While it is okay to teach them that money does not grow on trees, they shouldn’t take on the heavy burden of worrying about money each month.  

Changing Perspective

Kids are strongly influenced by their social environment and peers. These influences often lead them to ask dicey questions that may feel uncomfortable to answer at times. For example, ‘Dad, why do we have an old car, whereas, my friend John’s Dad has a Mercedes?’, ‘Mom, why do we live in an old house?’, etc… Such questions are hard to answer as your kids aren’t yet exposed to the realities of life. Perhaps they are too young to understand financial matters or money related issues. It’s important to always keep the lines of communication open between you and your children. You never want them to be afraid to ask you questions, even the tough ones.  When these arise, change their perspective.  Instead of comparing the differences between them and their friends’ families, encourage them to find the similarities or think about what they’re grateful for in your family.  Even from an early age, children can be taught that things are just things and are not a true representation of what family means.  

Family Finances – What and How They Should Be Told?

Most kids below the age of 5 are understandably clueless about money. It is a change in approach, attitude, and belief that has encouraged parents to let their kids know about money matters in a family. However, different parents and even child experts bear different perspectives regarding this matter. Some argue that children should never be told about how much you earn, which parent earns more, who owes money, how much you spend on different occasional activities, etc. To the extreme, some parents also believe that children should never be told about family finances or anything else regarding family earnings and spending at all.  Ultimately, of course, it is up to you how you handle the money talk.

There are times when families may find themselves stuck amid financial crises which may disrupt their regular monthly budget. In certain situations, it is better to share hardships with your kids so that they can understand why things may look a little different from time to time.  

The Younger Ones

Obviously, younger children, between the ages of 2-4, don’t have the brain power to understand things well. To them, money talks may sound like Chinese.  Therefore, attempting to share any kind of financial information with them would yield no significant impact no matter how hard you may try. Child psychologists from around the globe recommend not to share family finances or anything at all relating to money to children of such a young age because it is unhealthy for their brain.

The Older Ones

When kids get older, they understand things more completely. This means that you can breathe a sigh of relief and share money related issues with your family, especially the older kids. Older kids have the brain capacity to evaluate and understand things which means they will better understand whether or not, they can afford to buy a certain thing. As a parent, you need to teach your kids how to make optimal use of scarce resources so that they can know the significance of money and savings. Sharing may be called caring but, when it comes to family finances, it should be shared with kids when the age is right—not before that!


Family finances are often kept private by parents because they don’t want their children to feel certain money-related pressures from an early age. However, as soon as kids grow older, they need to be told about finances so that they can begin to understand the value and worth of hard-earned money.

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