Why is it so hard to talk to kids about money?

As a business writer for more than 20 years, Jayne Pearl assumed that she knew how to teach her son about money. But when she began giving him an allowance at age 7, she received a humbling surprise.

"It was a disaster," says Ms. Pearl of Amherst, Mass. "He couldn't spend it fast enough. We argued a lot. I was clueless how to deal with him."

She has plenty of clueless company. Financial issues remain an awkward topic in many families. In a consumer society, as ATMs bloom on every corner and wallets bulge with credit cards, parents often find it hard to teach responsible money management.

"Right now money is still harder to discuss than sex," says Neale Godfrey, author of "Money Still Doesn't Grow on Trees." Only a quarter of 13- to 21-year-olds say their parents have actively taught them how to manage money, the American Savings Education Council reports.

That ignorance can have long-lasting consequences. Last year 150,000 young adults between 18 and 25 declared bankruptcy, Ms. Godfrey says. In addition, one teenager in five doesn't know that a loan must be repaid with interest, according to a new survey by the Charles Schwab Foundation.

Why so much parental reticence when it comes to money talk?

Some parents cling to the outmoded Puritan ethic that money is bad, Godfrey says. Others think that if they talk to their children about money, they must disclose how much they earn and examine their own bad financial habits. Not true, Pearl insists. "We don't have to open up our profit and loss statements to our kids."

And then there's the guilt factor. Many times parents substitute money for time, Godfrey observes. She urges parents to think carefully about the messages they're conveying to children.

Whatever approach families take, attitudes toward money trickle down from generation to generation. "If parents are able to be open with each other about money, then they're going to be that way with children," says Mary Staton, a financial adviser in Charlotte, N.C. "But if it's such an emotional issue that they can't talk about it readily, then they probably won't talk about it with their children."

Even without specific conversations, children pick up signals. The bulk of communication about money is nonverbal, says Jon Gallo, a Los Angeles estate planner for wealthy families.

"It's what you do, how you behave," he says. "Do the parents play credit-card roulette - max out one, use another? That's sending a message to the children about how to behave with money."

He suggests that parents take advantage of "teachable times" that occur daily. A 4-year-old can put money in a parking meter, for example. Children can also pay for items at the grocery store.

As Pearl considered ways to help her son change his cavalier attitude toward money, she gave him incentives to save by encouraging him to think about something special he wanted to buy. "I said, 'If you save this amount, this is how long it will take you to earn it.' "

When he was 10, he saved for a year and a half to buy an electric guitar. Calling it "a tremendous accomplishment," Pearl says, "I would have robbed him of the achievement he felt if I had bought it for him."

Still, Pearl, the author of "Kids and Money," does not pretend that these lessons are simple. "You can't walk out the door without being bombarded with ads. The message is buy, buy, buy. Parents are the only place where these messages can be countered."

Saving isn't the only skill parents must teach. Children and teenagers also need to learn how to spend wisely. "If you have a kid who's hoarding money, parents may think that's great," Pearl says. But if parents don't help them achieve a balance between saving and spending, that could create problems if they marry someone who spends excessively. Equally essential are lessons in giving - learning the importance of charitable contributions.

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