Spilling the Financial Beans to the Kids

[HFWR]

When I was married, and had two-step kids and one of our own, we went through some pretty lean times, but the kids were all too young to have a good frame of reference. Talking about "we can't afford that" seemed to cause the kiddos much worry. Thus my recommendation to consider the age and maturity of the child...

Certainly, given the ignorance of finances we've all witnessed in "grown-ups", it's important to at least attempt to give the kids a frame of reference.

 

[sarahsays]

I think it also depends on your experience as kids (even within a family). My parents didn't talk to us about money growing up (other than, yes/no when we asked to buy things). We got a measly allowance that we could supplement with additional chores.

As the oldest, I witnessed (or was more aware) of the leaner years early on in my parents' careers. My dad has always commented that even when I was little, I would save money for a bigger purchase that I valued more (or just saved more period). Even still, when I graduated college 3+ years ago, my parents wanted to give me money to take a big trip (around $2000), but they were afraid that if they gave it to me before I had planned the trip, I would put it into savings!

My sisters, who never really were aware of the leaner years, spent, spent, spent. For the most part, they still do. I really worry about my youngest sister. My parents have always spoiled her, she's never even had a summer job (she's a sophomore in college). They still pay her credit cards (whatever she charges). I fear that she's going to rack up debt as soon as she graduates. I don't know whether my parents would continue to bail her out or whether the money stops when she finishes school.

I think that if we had all been taught to budget, or at least seen the inner workings of the household finances, we might be on more even ground and my sisters might be in better financial shape for the future.

 

[hankster]

Our (now adult) children know about what our annual income is, but not our assets or net worth. We have been deliberate about living LBYM in front of them and trying to lead by example. They regularly ask financial advice and we're pleased to see them being fairly frugal and overall making good financial choices. We keep a 3-ring binder with important documents regarding insurance policies, retirement accounts, location of wills, and personal notes about wise financial conduct with the inheritance should the worst happen to my wife and I.

 

[macdaddy]

I don't understand all of the concerns over disclosure to kids. I think whether a kid is a spendthrift or a lazy bum has much more to do with how they were raised than how much money their parents have in the bank. I went to prep schools and saw that in action - if the parents worked hard, valued money, valued education, spent time with their kids, etc, then the kids learned those lessons and became productive. I have friends who will inherit tens of millions who work 80 hours a week at investment banks (and will continue to do so until they die) because they were raised to be ambitious and take pride in their work. On the other hand, there are kids who saw their parents blow money away, never work, be lazy, etc, and they are bums whether they have a trust fund or not. You can be unemployed and still sit around and do nothing all day.

My parents always shared with me how much they made and how they invested family funds. I appreciated it when it started and appreciate it very much now - because it motivated me to learn as much as I could about financial markets to put what they told me in context. I never looked at the family money as an excuse not to work. It was always presented as a safety net in case anyone in the family had educational opportunities or health care concerns.

Do you think you'll be qualified to manage your own finances at 70 years old? 80 years old? 90 years old? I've seen MANY older folks be taken advantage of. Nobody thinks it can happen to them or their parents until it does. My parents took over their own parents finances last year after a near-miss. My parents have told me that in their 70s they want to phase all responsibility for managing the money over to my brother and I so they don't have to worry about it. Is this just an issue of trust, and most people don't trust their kids?

And what about estate taxes? What if the estate tax limit is lowered to a million dollars (as many think it will be)? Whenever you die, your heirs will have to write a massive check to the Government. You can say - hey, I won't care, I'll be dead - but I think that's a cop-out...would you really rather the Gov have that money than your kids and other family members who loved you in life and will keep your memory alive? Don't most people retire early in large part to spend more time with their kids/grandkids? I think there's an element of destructive blue collar mentality in play here...the same mentality that told kids they have to move out at 18/21 and pay their own rent on their own place (to make some landlord rich), rather than live at home and save money and be around their family (which happens in every other country in the world).

 

[CuppaJoe]

... Don't most people retire early in large part to spend more time with their kids/grandkids? I think there's an element of destructive blue collar mentality in play here...the same mentality that told kids they have to move out at 18/21 and pay their own rent on their own place (to make some landlord rich), rather than live at home and save money and be around their family (which happens in every other country in the world).

Has there been a poll on this topic, "do most people retire early to spend more time with family"?

Let the class wars begin again. I'm stepping out of range. End of rant.

 

[Moemg]

Do you think you'll be qualified to manage your own finances at 70 years old? 80 years old? 90 years old? I've seen MANY older folks be taken advantage of.

70's is not that old . This is the second post I've seen infering that 70's is old . My Mom is 91 and still sharp . She manages her own finances fine and she drove until her mid eighties . If we all plan on living until late 90's ,twenty years is a long time not driving or managing our finances . I for one am not giving up my independence until it is time and I seriously doubt it will be in my 70's.

 

[REWahoo]

Hey, 70 is the new 50!

 

[sarahsays]

70's is not that old . This is the second post I've seen infering that 70's is old . My Mom is 91 and still sharp . She manages her own finances fine and she drove until her mid eighties . If we all plan on living until late 90's ,twenty years is a long time not driving or managing our finances . I for one am not giving up my independence until it is time and I seriously doubt it will be in my 70's.

I hope that we all are still sharp and living well in our 90s. Unfortunately, according to this article in the NY Times, "9 of 10 people who live into their 80s will wind up unable to take care of themselves, either because of frailty or dementia."

I'm not sure it's that high, or that it will continue to be that high, but I think it's worth considering that you might be unable to take care of your finances as early as your 80s.

 

[OAG]

BS I am almost 70, lots of wear and tear, but I can still find my way home, remember my kids names, even their addresses, and I have not ran into a flea market, yet. But I am leaving for Florida next month so maybe I will get the flea market yet.

 

[cute fuzzy bunny]

 

[Meadbh]

My parents were intelligent people with a high school education who actually did a great job of managing their money. They shared their understanding of basic finance with me as early as I was able to absorb it. They had a healthy fear of debt for consumer goods and believed in paying off mortgage debt ASAP. I had a bank account since babyhood and can still remember going to invest my communion money and reviewing the compound interest with the bank teller. I recall reading my Dad's retirement planning brochures when I was 10 and he was 50 (he figured it was time for some serious retirement planning but didn't retire for anther 12 years). I remember learning about mutual funds, dividends and withholding taxes at age 12 when my Mom had an inheritance and years later, when she put it in trust for me, learning about estate planning. As soon as I became an adult, my parents and I made a list of all our accounts and exchanged it. I didn't need to know their cash flows or net worth. They never calculated NW anyway, because they had structured excellent pension income. When she needed eldercare Mom agreed to put my name on one of her accounts so I could take care of the bills.and appointed me as executrix, I really appreciated having a good understanding of the financial situation. Keeping me in the loop enabled me to help them, prevented much worry, and certainly has significantly helped me to become LBYM and FI.

 

[Moemg]

I hope their kids drove them to the games !

Senior International Tennis Dominated by U.S. Teams

 

[laurinsane]

I'm 25. I have an idea of what my mom inheritted from my grandfather, and guess that my father is somewhat well off. But neither or them have intimately discussed their finances with me. My grandfather always said "Let everyone else believe you have nothing more than a pot to piss in." He was very well off but led no one to believe that he was.

 

[Zoocat]

70's is not that old . This is the second post I've seen infering that 70's is old . . . I for one am not giving up my independence until it is time and I seriously doubt it will be in my 70's.

Sorry to hijack the thread but need to briefly add my agreement here with Moemg.

I have two friends who are 70. One is almost finished earning a Masters Degree in linguisitics that she started at age 68. The other travels all over the world without her husband because he doesn't like to go anywhere the citizens don't speak English. She is full of fun and did the zip line in Costa Rica!

I hope that I am similarly awake and energetic at 70.

Back to the topic. My parents never talked to me about money, gave me a measly allowance and pretty much told me you're on your own after high school. My dad had never talked about money with me until my divorce and he wanted to find out how much I ended up with. Also in recent years he has shown me his investment balances. I guess he wants me to know that he has enough to take care of all his needs.

That's basically my attitude with my grown children. I let them know that I have the means to support my lifestyle so they don't worry that I'm spending too much when I go traveling to exotic places.

 

[UncleHoney]

I never knew what my parents were making when I was a kid. I don't know what I would have done with the information had I known.

I did find out when we bought our first house in 1975 (payments $198 ) that my mom and dads first house (1948 ) cost them $57 a month on $200 a month income.

I also know when my grandfather retired from the railroad in 1957 he was making about $80 a week. Found that little tidbit in his diary.

After my dad died in 88 my younger sister thought she could help [-]herself to [/-] manage mom's money. She couldn't wait to find out where and how much there was. She got more than a little bent out of shape when mom told her to butt out and whatever was left when she got done with it would be divided three ways.

Mom's plan was to spend all her kids inheritance.

About the most sage advice I got from my parents about finances...Money doesn't grow on trees.

 

[LRS]

I always worried about my dad's financial situation. He was super paranoid about discussing his finances and suspicious of any effort on our part to assess his financial situation. I didn't want to kill him and take his money, I just wanted to make sure that he had enough to buy groceries and pay bills. After my mom died, he got so that he only ate soup and crackers. We couldn't tell if he was depressed or poor.

Being a depression child, he was also constantly afraid that he would run out of money, so he lived super frugally, which was good, but he also wouldn't fill prescriptions or get new eyeglasses and so on, which was bad. We were never able to talk to him about finances. Period.

I remember he had a rage attack when I was filling out my FAFSA (35 years ago) and he refused to submit any of his financial information, which made it tough on me. I guess that was his privilege, though.

I have no reason to fear my kids. They will become co-executors on our estate when they are old enough. Neither one is particularly greedy or acquisitive, so I have no worries about them slipping rat poison in my soup. Beats a nursing home, anyway.

 

[Independent]

This is a long thread - I'll try to add one thing I haven't heard so far.

I wish we would have shared more about our spending with our kids when they were early teens - weekly food bill, utilities, clothes, etc.

The reason is that we covered their basic college costs, and they were very high compared to our LBYM lifestyle. I think the kids could have made the comparison and felt the importance we were putting on getting them through school without loans.

 

[free4now]

Good point. I thought I was fairly financially aware as a youngster but in retrospect one thing I had no clue about was what it cost my parents to send me through college. As I now look back at all the flights home for breaks, long distance phone calls back when that was expensive, not to mention tuition room and board which was expensive even with financial aid and loans.

These days living as a frugal FIRE, I can't imagine paying the costs of sending even myself to school.

 

[armor99]

My folks at no time EVER talked about finances with me. If I get marrried and have children, I will not make that kind of mistake. Fortunately in my late 20's a friend of mine started talking to me about retirement, 401k, reccomended this forum, etc. I owe him an enormous debt of grattitude. Without the flash of inspiration I would not be in the much better situation that I am today.
To this day, I still have no idea what my folks financial situation is. But I gather it is probably not too good. When I mentioned to my father that he should have around 1 million for retirement his eyes got really big, and he confessed, he had no where even near that much (he is currently 62). Sadly my folks seem to live (and have lived for most of their lives) in a permanent state of denial, and wishful thinking. My mother has taken on the attitude that she is retired already, and that all financial stuff is my fathers job. So I bought a few retirement books for my father, which I guarantee will sit on a shelf and never be read.
I truly believe the reason why so few parents talk to their children about the financial situation, is lack of planning for, or thinking about the future. There are so many people that I have met that view retirement as something that just sort of "magically" happens, without any planning or forethought on the part of the retiree. I can remember mentioning to my mother that I am currently saving for retirement. Her reaction was, "You are far to young to even think about that right now". Some people still believe that somehow the job, govt, children, will be taking care of them completely one day, so why bother. They live blissfully unaware that sooner or later reality will make a comeback into their lives, and it will probably not be too pleasent.
Just a question to the forum. I personally beleive that my folks will be heading for a complete financial train wreck in the next 10-15 years. (This is when the reality of their situation will finally dawn on them). I realize that I will prbably have to financially save the day at some point (still considering how much I will want do or not). Can I start some sort of tax defered fund if I want to help offset this eventuality? I have the standard 401k, roth IRA, bank savings, etc. I was just wondering if there was some sort of (save your parents in 20 years because they left their future to chance) fund out there somewhere. Probably not... but I thought I would ask anyway...

 

[sarahsays]

I was just wondering if there was some sort of (save your parents in 20 years because they left their future to chance) fund out there somewhere. Probably not... but I thought I would ask anyway...

There needs to be a fund like that. Maybe there will be 20 years from now as more aging parents are unable to care for themselves and don't have any money saved up for long-term care. However, in most cases the children who'd be taking care of them aren't much better off!

 

[CuppaJoe]

....
I remember he had a rage attack when I was filling out my FAFSA (35 years ago) and he refused to submit any of his financial information, which made it tough on me. I guess that was his privilege, though.
....

My did didn't have a rage attack (although that was within his personality), he just didn't fill out the forms. Years later my mom appolozed for that. My sibs speculated that he didn't want me to know that he had a large business debt. Family legend goes that his partner moved out over night taking all the equipment with him. It seems that my dad finished paying off that debt some 30 years later, just before he died. My sister was older and remembers the expression on dad's face when he saw that his partner's house was empty.

 

[willowbeezer]

I believe that kids should have some idea of their parents financial situation.

I recently discovered that my parents are in a financial mess. We did not know since it was taboo to discuss finances with them (don't ask, don't tell). However, as they are entering retirement, I forced the issue to better understand their retirement income.

I was shocked. 0 net worth and declining. Large credit card debt that consumes majority of income. It is clear that I will need to provide some sort of bailout but would have been much better off had I knew what was going on several years ago. Culprit here is that they have (and are) living beyond means and do not understand the credit card game. We now have a game plan, but will be painful.

I discuss financials with my 9 yr old to reinforce the fact that the way some of her friends live is not normal (we live in an affluent neighborhood) and encourage savings and spending below means. She knows that college and neccessities are on us. Discretionary items come out of her allowance but we are happy to know that she is a saver (brokerage acct is at $4k and growing). She senses that we make a good living but that there is no free lunch.

Overall, I think sharing financial information with the kids is a great learning opportunity (call it a real life case study) and can only help.

 

[youbet]

\ She senses that we make a good living but that there is no free lunch.

Overall, I think sharing financial information with the kids is a great learning opportunity (call it a real life case study) and can only help.

Soooo..... does she just sense that you make a good living? Or did you share financial information? You know, actually show her the add up of your total net worth, your check stubs, etc.

I think most have agreed it's good to discuss finances in general with the kiddies, but OP wants to know if we share our detailed salary and net worth information.

 

[52andout]

My kids know where the safe is, where the list of our accounts is in it and our general net worth. They knew what we were making college years and what we had saved for them as well as what we gave them. We showed them 401K balances and how they went up each year.
Now approaching thirty, they have good 401k's and ask for advice on how to asset allocate etc. They talk about saving up for things instead of paying credit. I believe this is due to our influence.

If they want to kill me for my money I don't want to live anymore so have at it.

 

[kumquat]

I've tried to teach my kids a few basics about money:

1) Avoid debt, debt is evil.
2) LYBM
3) Look after your finances, no one else will

That being said, they have no clue of our NW. If they did (and thought they might inherit), they might try to ER at 25 & 28.

I always thought I could guess the finances of my M and FIL. I was executor for both. When M died, I guessed within 5% what her estate was worth (although she had never discussed it with me). When FIL died, I was shocked at what he had, the ultimate LYMB'er.

I hope my kids get a similar shock, whether or not they are the recipients.