My girls have asked many times, "Are we rich?" Each time, I would answer that we were very rich because we had each other and our health.
That worked in the early years. By middle school, however, they knew as well as I did that this was not the question they were asking. They wanted numbers.
This question of when is the right time to bare the family finances—to open the financial kimono—is one most parents struggle with. They are afraid to do too much too soon or too little too late.
Last summer, I knew my oldest daughter, Allison, not yet 16, was ready. My husband and I took her along for our quarterly meeting with our financial advisor, Wayne Janus.
I would like to tell you this was a purposeful moment in the financial education of my daughter. It was not. We did it at the last minute, mostly because it was summer and she was bored. But Allison is a money savvy kid. She has been managing her monthly allowance, using the allowance contract I have talked about in previous columns, since she was 8. She knows she has four choices for money—save, spend, donate and invest—and how to set goals for those choices. By the time she was 13 she had saved $780 and transferred it from her savings account to a mutual fund. She understood the power of paying herself first and knew that compound savings would grow her money in her savings account and her mutual fund.
Not every child is as financially savvy, but they can be. Following the advice in this column over the past several years gives you the same opportunity to get your child to be money savvy. And, sooner or later, every child is going to ask what’s behind the financial kimono.
So, get ready for that day now.
Think about who your financial advisor is. Is it your banker? Your financial planner? Your broker? Maybe it is even you. Then, get your child prepared for that first meeting with your advisor.
Consider doling out tidbits of information just to see how it’s received. For example, the next time your child asks for $20, open your wallet to show him how much is inside. Then walk him through the expenses you’ll have to pay out of the remaining cash. It may not keep him from grabbing the $20, but it will help put the cash in perspective.
Or the next time you sit down to pay the big monthly bills—the mortgage, utilities, phone, cable and cell phone bills—ask your child to join you. Let her watch as the balance in the check book goes down, down, down. Make a point of showing her how you take responsibility for making deposits to get that balance back up for next month.
If those lessons seem to be sinking in, consider opening the kimono a little wider.
But first, set some ground rules. The most important is to make sure your child understands that anything she learns about the family finances is confidential. It is to be discussed only with you. Unless and until your child understands this No. 1 rule, keep that kimono closed.
Next, be sure your child has the foundation necessary to understand what she’s seeing once you open the robe. If she doesn’t understand the basics of money, what she sees can be confusing, overwhelming and scary.
Then and only then—regardless of the age of your child—is it time to reveal all.
When we took Allison with us to meet Wayne, we gave her a pen and paper and told her not to talk during the meeting. She could listen and write down her questions for her father and me to answer later.
I have never seen my daughter listen so closely to our instructions. But this was about money and money will always capture a child’s attention.
Since it was a last-minute decision, we didn’t have time to warn Wayne that Allison would be joining us. But he didn’t skip a beat. At the most appropriate times, he spoke directly to Allison, explaining the power of compound savings, taxes and how little people save today. Mostly, our meeting was as it always is: a lively discussion of our business, our investments and the essential planning we need to do to maximize what we earn and save.
After a three-hour meeting, we left to have lunch with Allison so we could answer her questions. She had many good ones.
During the car ride home, we asked Allison what the most important things were that she had learned that day. She had a ready answer: She learned that money is complicated. "If you want to live it up later, you can’t live it up now," she said.
Knowing she understands that is worth more than everything we have under our financial kimono.
Susan Beacham is the founder and CEO of Money Savvy Generation, a financial education company that provides innovative products and services to help parents and educators teach children the basic skills of personal finance, www.MoneySavvyGeneration.com. E-mail her at susan@MSGEN.com.