Are parents terrible personal finance role models?

77 percent of parents say they are not always honest with their kids about money; 15 percent lie to their children weekly. How does this dishonesty affect children's future finance decisions? 

Chris Helgren/Reuters/File
A piggy bank branded with the logo of the English Premier League soccer club Arsenal is seen in a souvenir shop in London. The way in which parents discuss money with their children affects their future finance decisions, Trent Hamm explains.

Recently, I came across this article from Time Business arguing – quite convincingly – that parents are poor financial role models for their kids. From the article:

Most parents (77%) say they are not always honest with their kids about money; 15% lie weekly. Half are willing to discuss saving and spending issues but almost no one talks about tougher concepts like inflation (19%), investing (16%), diversification (11%), and asset allocation (8%). A third avoid talking about the family’s finances altogether.

Let’s break that down, piece by piece. 

Most parents (77%) say they are not always honest with their kids about money As a parent, I will say that it’s incredibly difficult to always be 100% honest with your kids about money – but that depends on what you mean by honesty. Some parents might view full honesty as requiring them to tell their children about every financial issue that might affect them – otherwise, aren’t you being dishonest by exclusion? I think that it’s very valuable for parents to be fully honest with their kids when financial questions come up, but they don’t need to be privy to every financial discussion, particularly when they’re young.

15% lie weekly This part is a bit awkward, though. If your financial situation is in such disrepair that you feel the need to lie to your kids about money weekly, then something is awry.

Half are willing to discuss saving and spending issues Only half? Also, discussing these kinds of things in the abstract isn’t a good way to reach teenagers or younger children. You have to make it tangible and connected to something in their life that they care about.

[A]lmost no one talks about tougher concepts like inflation (19%), investing (16%), diversification (11%), and asset allocation (8%). These are tougher issues to discuss, particularly when children are younger, but I think all of them should be a part of discussions during the teenage years.

A third avoid talking about the family’s finances altogether. A third? That’s a third of children who will have no idea what to do about family finances when they reach adulthood.

I draw two conclusions from all of this.

First, there are a lot of families in financial distress. If you’re lying to your children on any regular basis about your financial state, then there is some aspect of your financial life that you do not feel comfortable with, which is usually a sign that there’s something out of whack.

I’ve found that, as a parent, my children are moral arbiters, to some extent. If I’m doing something, I’ll often ask myself whether I could explain the decision I’m making to my kids and explain why it’s the right decision. If I couldn’t do that, should I be doing it at all?

It’s a pretty simple test and it cuts right through a lot of nonsense. It also makes it easier for me to explain anything going on in my life to them (except for the strictly adult elements).

If we’re in financial distress, it’s going to be as a result of a series of bad choices on my own part, ones that I would be unable to explain to them. If I’m making a decision I can’t explain to them, I think very seriouslyabout whether or not I should follow through with it.

Second, a lot of parents simply can’t find a way to communicate money issues with their children, whether it’s because of an uncomfortable topic or because of their own lack of knowledge.

Neither one is an adequate reason to skip out on discussing a money topic with your family. If you skip talking to your kid about a life issue because it’s uncomfortable or because you don’t know enough about it, you’re failing as a parent.

If I ran the country, every parent would receive a copy of Raising Financially Fit Kids the day their child was born, and they’d be required to read it. It’s the best one-shot book I’ve seen on how to teach your children about money issues.

If you’re a parent and you would mark a poor answer on any of those survey questions, rethink how you’re teaching your kids about money. You’re doing them – and by extension yourself – a disservice.

The post Are Parents Terrible Personal Finance Role Models? appeared first on The Simple Dollar.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.