Are you overprotective of your children? Checkmark all the rules that apply in your household:
(a) Lite-Brite play is limited to 30 minutes, lest the small plastic pegs overheat and cause second-degree burns.
(b) Fingerprinting and a retinal scan greet all visitors (and any accompanying pets). (Moist towelettes are provided to prevent smudges on the banister.)
(c) Money discussions are banned at the dinner table and any public living space until each child in the household is over the age of 18.
OK, these precautions are obviously excessive, but adults have been known to go to great lengths to keep their children out of harm's way. (I'll spare you my childhood stories about cello goggles.)
Unfortunately, when it comes to discussing family finances in front of the kids, keeping the conversation in hushed tones behind closed doors can do long-term damage. (Attention, Mrs. SaveKaryn.com!)
Most of us have money memories (I wrote about a few of mine last week) -- some more painful, and painfully embarrassing, than others. What is clear is that mom and dad's overprotective instincts -- while well-intentioned -- can have a profound effect on their progeny's adult financial affairs.
So the question becomes: Do you want to expose your children to the truths they need to know to create a lifetime of financial security, or to cocoon them in fiscal cluelessness?
I think I know what your answer is.
Teach your children well
The best money lessons come from you, mom and dad. And the little sponges have probably already picked up a lot more dirt than you know. Even the smallest exchanges have a lasting influence. Just read Storytelr1's account of an uncomfortable exchange he had with his mom in junior high school nearly two decades ago.
With a little thought, you can come up with hands-on money lessons that will leave your children with fond money memories and practical skills. Consider these strategies.
Make a mini-CPA: In these days of enlightened allowances, many families have children divide their weekly stipend into three piggy banks: spending money, savings, charity. Fools on the Family Fool discussion board recently counseled one parent about setting up her child's first allowance. Read the thread here. If that's too complicated, consider encouraging savings by offering a parental "match" for those dollars put in the bank, just like your employer does for your 401(k) contributions. When they are old enough, send them this link to encourage a little entrepreneurialism.
Teach in "real-time": Every trip to the store or time spent paying bills is a "teaching moment." Yeah, I bristle at that phrase, too. On the other hand, all the lecturing in the world can be pointless. Abstract financial concepts are just that -- abstract -- when described in third person, after the fact. Particularly when Fear Factor is on in three minutes. Engage your kid in "real time" during your daily money chores so they'll see how the theoretical issues of savings, bill paying, and cursing out the MasterCard people actually work.
Be a broken record: Annoying? Yes. Does it work? Yes.
Institute a bonus system: Fellow Fool LouAnn Lofton told me about one of her most vivid money memories. "Starting in first grade, my father determined that I would be paid for the grades on my report card. The catch was that I got $5 for every A and nothing for anything else." You better believe that LouAnn was a straight A student from the get-go. However, by the time her younger brother started school, her parents had instituted a sliding scale. (If you want to make the lessons stick, you may have to modify.)
Consider an open-wallet policy: I often use my friend Kristen's family as an example of trusting and forward-thinking parenting. When each of Kristen's older sisters turned 13, it became their responsibility to balance the family checkbook. In doing so, each learned what it cost to pay the mortgage, credit card bill, A/C, and repairs for the family's bright orange VW van. When Kristen turned 13 and was handed the checkbook, she got a dose of fiscal reality that stuck with her. To this day Kristen, who now has two kids of her own, lives a life of financial integrity.
Instituting, and sticking to, a concrete money plan can get complicated in households where there is shared custody. Heck, getting on the same page about money matters may have sent you and your child's other parent to divorce court in the first place. Still, you can encourage consistent money rules in your household. Just let your child's other parent know how you are handling allowance and other money-related tasks. Maybe he or she will get a few good ideas.
Chatty Curts and Cathys
Of course, there are risks to having an open checkbook policy -- mainly that kids can say the darndest things. Publicly. Loudly. And about your salary.
The fear of blabbing keeps many families from talking frankly about their finances. It makes sense to refrain from discussing collection agencies, inheritances, HELOCs, and Uncle Dwight's tiny gambling issue in front of Junior until he understands the importance of discretion. Only you can decide when that time comes.
What if he does happen to broadcast your latest bonus to the girl next door? Well, what's really the harm?
When it comes to money matters, I think we all need to give the tethers a little more slack. Financial openness -- talking with our own parents, our pals, our kids -- can be a good thing. It's when the family finances are kept from the kids that there's a risk of long-term harm.
Dayana Yochim was taught well by her parents. She talks openly about her finances every week on Fool.com. Her bio reveals all.