Many parents are reluctant to talk to their children about money, but these are important lessons to help them achieve financial independence when they are older – even if you aren’t a financial genius yourself.
As children get older, they notice their friends’ houses and cars of different sizes and have discussions on the school playground about their different holiday destinations.
“In the senior phase of junior school, they work out very quickly that different incomes yield different lifestyles and this is usually when the question about income gets posed to parents,” said Kerry Sutherland, certified financial planner at Alexander Forbes.
READ: Make saving money fun for your kids
“You can tell them that you understand they have questions about money and how much you earn, but answer it by saying let’s rather talk about what food, toys, stationery, extramural sporting activities cost, and if we can afford them and how, and about saving for things like holidays.”
Often the exact number is not meaningful to children, they rather want to use it for comparison purposes.
“You need not tell your kids how much you earn, but you can use it as a motivator to encourage them to work harder at school if they wish to achieve a certain lifestyle as an adult,” said Sutherland.
When your children start with this line of questioning, Sutherland advises using it as an opportunity to discuss basic financial planning.
“Explain to your kids that a lifestyle is not always about what you earn, but that it is also about how you manage your money. You can discuss budgeting, keeping debts as low as possible and of course the compounding benefits of long-term savings. It is important to emphasise that it’s not wise to spend all you earn every month as when you reach retirement age, you must have saved enough to see you through your retirement years.”
“Telling your child how much you earn so that they can brag to their friends is unhelpful. If it’s to explain why you can’t afford a fancy holiday, then just explaining this will suffice. It’s also not necessary to treat it like a secret. If your adolescent asks, it’s important to be honest, open and authentic in your answer.”
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