“Dad, How Much Do You Make?”

“Dad, How Much Do You Make?”

“Dad, how much do you make?” Those were the words my two daughters (13 & 11) accosted me with the other day.  It caught me off guard and unprepared to say the least, although not surprising, they asked, as doesn’t every kid want to know how much their parents make? 

This got me thinking that it would be a great discussion point as to when and how much to let your children in on your personal finances.  I do think some level of understanding or transparency is warranted, but it is a power that should be yielded carefully.

Age Bands:

Before High School-

I’m going to use large age ranges here and leave it to you, the adult and parent, to decide.  Now, certainly, there is an age where you can basically ignore the question.  I don’t anticipate anyone’s 5-year-old pushing them into revealing their deepest, darkest financial secrets.  However, there will be an age where you are asked in earnest, and if your kids are anything like mine, a perfunctory shrug won’t cut it.  I don’t believe that my daughters’ developing brains can handle or have any concept of money at this age.  I also don’t subscribe to the fact that they can handle this information in an adult manner that won’t influence their thinking.  To them, they simply have no concept of money, and sharing any specific information will have a negative effect.

So, how did I answer?  I used broad assumptions that we are very fortunate, where we are comfortable to have everything we need and plenty of wants.  I think it is important for them to learn about finances and the responsibilities that go along with them before I start getting any more granular.  Of course, that answer didn’t satisfy them as they want to hear “my daddy makes 5 gagillion dollars a year,” but it will have to do for now.

High School/College–

Now those little monsters’ brains are developing more, and they are starting to show a little more maturity and responsibility.  Understanding that every child is different, I do think somewhere in this age range, you can get a little more specific without revealing everything behind the curtain.  I still think they haven’t really understood money or had their first adult job, so I would tread carefully, but I can use a range when referring to finances. 

For instance, I might answer the question that we do well and use it as a teachable moment.  I might answer something like this: “We are very fortunate and worked very hard to get to where we are.  When mommy and I met, we could barely afford a date night and had to ask permission if one of us wanted to spend more than $100.  Through dedication and hard work, we are now in a financial position where we can afford to live a more comfortable lifestyle.  Now, combined, we are over XYZ dollars per year.  That said, we must save a lot of that to afford your schooling, our lifestyle, and to make sure we can retire someday.”

This kind of answer gives information without selling the farm.  It also provides some hidden lessons that it took you time and hard work to get here, and that even if the number sounds large to them, like $400,000, it must be treated responsibly towards your family.

Adult Ages or More Importantly, Your Age–

So you staved off the interrogation as long as you could.  Likely, your kids have stopped asking you by this point.  That doesn’t change the fact that at some age, it is time to reveal your hand, for most of us.  I can’t put an exact age on it because kids mature differently, and there are many circumstances that require secrecy longer.  In most situations, however, you will hit an age where your children really should know the finer details of your financial life.  They should know for their own planning and estate planning, but also they should know how your finances (or lack thereof) will impact their lives. 

I can’t tell you the number of times my clients are put in a situation where they have to work longer to support their elderly parents.  Or how many times their parents’ finances impact their own.  Being left in the dark is not healthy for them or for you.  Do you want to get sick one day, and have to pass the torch to your children, having them be kept in the dark all those years?  Or do you want to slowly bring them into the fold and share your wishes and desires?  I chose the latter.

There is no 100% right answer, but there is a time and a place for everything.  This has a little bit of that Goldilocks feel where there is a too soon, and a too late.  It is incumbent upon you to decide when it is just right.

As always, stay wealthy, healthy, and happy.