The question comes up during recess or at an after-school club: How much money does your mom and dad make? What does your dad do for a living? Are you as rich as we are?
Or sometimes it’s the inquiry about going to a sleep-away camp this summer, one status symbol for the 7- to 11-year-old set.
So your daughter comes home and asks you: “Mom, are we poor? How much money do you make?”
You’re caught unawares, and aren’t sure what to say. Before you give your 9-year-old your salary or even an estimate of what you earn, listen to Janet Bodnar, mother of three and editor of Kiplinger’s Personal Finance magazine which runs her online a kids and money column.
No need to blurt out your base salary and having that blabbed all over the school. “You don’t really have to tell them how much you make,” said Bodnar, who’s also the author of Raising Money Smart Kids. Children don’t understand money and what it takes to pay for everything. “Whether you make $30,000 a year or $130,000, surely it’s a lot more money than they’ve ever seen,” said Bodnar, who has assigned and edited some of my articles in the past.
She suggests parents turn the uneasy question of how much do you make? into “a lively discussion” of occupations and which ones earn more and why. “How come Kobe Bryant makes X million a year? Why does Angelina Jolie make so much? Why is she so valuable?” Parents can talk about education, skills, passion and years of experience – how a plumber with 15 years experience makes a good wage. They also may want to discuss why some people take lower paying jobs such as librarian or veterinary assistant.
It’s important to talk about your money situation if someone in the family has just lost a job, or had their hours slashed. It’s useful to allow kids to see the ways money decisions are made, and when and how cuts to spending are being made, said Gail Karlitz, co-author of Growing Money: A Complete Investing Guide for Children.
Sometimes kids ask about salary when they’re really wondering something else. They may have heard about all the foreclosures and families losing homes, or a business such as Borders Group closing a lot of stores, and worry about their family’s future. “They’re really just looking for reassurance that things are going to be okay,” said Karlitz.
Or as the hypothetical daughter inquired about salary after her recess conversation, she really wondered: “Why can’t I go to summer camp like Jessie?”
So figure out what real information your child is seeking, said Karlitz, whose background is in counseling. Then explain your point of view or the reasons for your decisions or deferment of a purchase. If your daughter wants to know why she’s not going to a $1,000 a week summer camp, talk about how you choose a family vacation or a bigger house as more worthwhile. Or when your sons see a beautiful car and say they want you to get one, explain that you’re waiting another year to buy a new one so you can put aside money for their college fund or another purpose.
Sometimes parents’ salaries become another way for children to be competitive, said Karlitz, who also counsels against sharing specifics with children. She doesn’t want to encourage children to judge others by how much they earn. “We should be judging people by ‘are they good people?'” she said, and do they make choices that reflect their values and priorities.
Her daughter, now 23, had a friend whose mother is a lawyer. “She works all the time,” she said, and made a lot of money. But her daughter often spent the weekends apart from her mom. Said Karlitz: “I have chosen to make less money and be home more because that’s what’s important to me.”
Once your kid hits the mid-teens – around 15 or so – you may want to start revealing more income information, said Bodnar. “College is a catalyst to that,” she said, and considering their costs in context of your earnings may make sense. “Kids need to know what your budget can afford…. That’s a really important discussion to have,” she said.