The danger of not teaching kids about cash


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Money worries are a part of life for most adults. But children also are sensitive to the anxiety in a household struggling to make ends meet.

In fact, children are aware of financial issues from an early age, says Lynsey K. Romo, assistant professor in the department of communication at North Carolina State University.

Romo’s research focuses on how people communicate about uncomfortable issues, especially those pertaining to health and finances.

She has found that children often come to their own conclusions about why parents talk about — or do not talk about — money.

Therefore, Romo says it is important for parents to be proactive in financial planning matters with their children. Such candor can help children to grow up to be financially literate adults.

Romo makes her case in the following interview.

Your study concluded that parents should talk to their children so the kids don’t develop misconceptions about finance. Please explain your findings.

Our study found that even young children are aware of financial issues and come to their own conclusions about why their parents talk about and do not talk about money matters. If their parents are keeping financial information from their kids, the children may think the worst — for instance, that the family does not have any money, which could worry the children.

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Additionally, if parents are not open about finances, children may grow up lacking the financial knowledge that will help prepare them for the future and enable them to make sound financial decisions (and to) not repeat any of the parents’ financial mistakes.

Parents must carefully consider what financial information to share with their children to provide them with the best financial footing going forward. If parents believe information is important for their children to know at some point, just not at the current time, they should level with their kids versus risking their child worrying about why the information is off-limits.

You found that parents are willing to talk to kids about some topics — spending, saving and earning — but not others. What are some of those other topics? Why is it a mistake for parents to avoid them?

Parents are great about talking about basic consumer and financial socialization topics, such as spending, saving and earning, but are much less likely to discuss topics such as family finances — in other words, issues pertaining to the family and money and business, including the cost of family bills and what the family has.

While it is not necessary for parents to provide children with specific numbers, it is helpful for children to grow up with a general sense of their family’s well-being and how the world works so they can be better prepared as adults. Parents need to do a better job of combating the culturally dominant money taboo; talking about money should not be off-limits.

Additionally, some parents may be reluctant to talk about money because they view their financial knowledge as poor. Parents should make a deliberate effort to improve their financial literacy so they can instill financial acumen in their children and prevent them from repeating their mistakes.

What did you learn about children and their experiences talking with their parents about money? Did you gain any important insights from what the children told you?

We learned that even young children (with an average age of 10 1/2) are interested in money and able to recall financial information and speculate as to why their parents conceal and reveal financial topics.

Interestingly, young children’s reports are consistent with the financial information parents in other studies (and studies of college-age children) provide, suggesting that children really are aware of and do retain financial information.

We were surprised with the statistically significant sex differences between the financial communication that girls and boys report receiving from their parents. Boys are less likely to report that parents concealed debt than girls, and boys reported more talk about investments than girls.

This finding is particularly interesting in a time in which approximately 40 percent of women are their family’s primary breadwinners.

Did your study reach any conclusions about why parents are more likely to talk to boys than girls about investments and debt?

It is possible that parents still view boys as future primary breadwinners who are more in need of this information than girls, and so parents are consciously or subconsciously talking about these topics with their boys more than their girls.

These sex differences suggest that such socialization differences could influence boys’ and girls’ understanding of financial information and may hinder girls’ interest in money, future financial acumen and investing efforts. Parents need to ensure that their daughters are just as financially prepared as their sons.

Based on the study findings, what general advice would you offer to parents who wonder about how they should talk to their children about financial matters?

This study underscores parents’ roles in communicating with their children about money, as children of all ages are learning — and retaining — general financial and consumer socialization information from their parents.

When deciding whether to discuss finances with children, parents should be aware that children may be able to understand more than parents think. It would benefit parents to carefully weigh the risks and rewards of disclosing financial information.