Family Money Talk

UPDATED: April 8, 2023
PUBLISHED: February 28, 2012
mother talking to child about money

Americans are facing a financial paradox: increasing bankruptcy filings and foreclosure rates vs. an economy based on consumer spending. Money—how we spend and save—is a touchy subject, even among those we love most. Our reluctance to talk about money may even be contributing in some ways to the financial challenges we face today—including America’s financial literacy problem—resulting in greater pain and stress for families.

Amidst the economy’s dramatic ups and downs, it’s hard to imagine a silver lining. But igniting America’s interest in financial literacy and finally learning how to effectively talk to one another about money may be the shiny upside to the downturns.

Talking about money with your partner

It’s important to note, however, that fighting about your spouse’s new golf club or fifth pair of strappy black sandals doesn’t count as having a conversation about money. David Bach is a financial strategist and bestselling author of Smart Couples Finish Rich. He says immediate crises like paying the bills often distract couples from working together on an overall financial game plan, and that’s a big mistake.

“You really need to plan a money day once a month and a financial anniversary each year to look at where you stand financially—goals for the year, what you are working toward as a team. Be on the same page,” Bach says.

The challenge is when people are attracted to their financial opposites. One person wants to spend like there’s no tomorrow, while the other wants to squirrel away every spare dime for a rainy day. One partner wants to talk about money, plan and set goals, while the other defers, relinquishing control and input, leaving their significant other to shoulder the responsibility and make all decisions. That’s a losing proposition for both their financial and emotional health.

Talking about money can actually help strengthen a relationship, says author and radio host Dave Ramsey. Discussing money forces couples to discuss just about every other topic. If done productively, that can translate to meaningful communication, cooperation and unity.

“When you have two sets of goals in anything, you’re not unified,” Ramsey says. “But when you’re forced to sit down and reconcile your goals, prioritize around the good of the other person and come into agreement on the spending of your money, then you’re agreeing on your dreams. You’re agreeing on your future.”

Come up with solutions that work for both of you.

Still having trouble convincing a lackadaisical partner to sit down for a heart-to-heart about money? Then proceed solo and spread your financial records out on the kitchen table in clear sight.

Pulling together all your financial records and setting up a new filing system tends to spark the interest of even [the most] reluctant spouses and partners,” Bach says. “Believe me—sometimes all it takes to change your life massively for the better is a small action and a small success.”

Instantaneously flipping your financial world upside down isn’t a great idea, but achieving small personal finance successes may inspire further change. Assess your current financial situation together so both partners are on equal footing. Look at where the money’s going, how much you owe and your assets. If necessary, update insurance and retirement beneficiaries and reexamine your mortgage.

Set goals together.

After you’ve gathered the data, act as a team by uniting in your purpose. Bach recommends exploring your top five values for who you want to be as a person and/or couple, then creating five specific and measurable goals based on those values. Consider and write down what you can do to move forward on those goals within the next 48 hours and whose help you should seek. Finally, set a start and finish deadline for meeting each goal.

Couples who focus their energy on a financial plan can positively impact the financial health of their families, as well as the health of their relationships. “The key is to truly believe that wherever you are starting from—no matter how bad or bleak it looks—things can and will get better,” Bach says. “If right now you are badly in debt or living paycheck to paycheck, I am here to tell you… it can and will get better… if the two of you take action together.”

How to talk to children about money

Better yet, bring the right kind of money talk out into the open at the dinner table and give your kids a financial head start, too.

Use age-appropriate examples with younger kids

“When it comes to financial issues, as in everything else you discuss with your kids, your role is to satisfy their curiosity in an honest and age-appropriate way…. Your ultimate aim is to turn out independent adults who know how to manage money and have a healthy regard for what it can and can’t buy,” author Janet Bodnar says in her book Dollars & Sense for Kids.

To that end, everyday life provides an ideal classroom. While abstract money concepts are above most preschoolers, parents can foster a connection between work and money by utilizing positive reinforcement, such as encouragement or token rewards.

By second grade, kids count change and eagerly meet grocery store scavenger challenges that help them discover low-price, high-value items. Young teens can understand stock market basics, play simulated stock games online or chart the ups and downs of mock stock purchases with adult help.

Be more open with teens to improve their financial literacy

“You don’t want to disclose the details of your family’s financial affairs to younger children, but teens are old enough to learn the nitty-gritty of household finances,” Bodnar says. Watching you write out monthly checks or paying bills online together can open teenage eyes to the realities of money: Parents aren’t ATMs.

If that doesn’t work, take a cue from one father who literally cashed his paycheck and had his teens parcel out the cash needed to pay the monthly household bills. “By the time his kids saw how little was left, they were talking about getting part-time jobs,” Bodnar says.

Ramsey says money conversations become a lot easier when children understand how their own personal economy works. “If Junior learns to work for, save, give and spend his own money, he’ll get it when you let him know that a spring break vacation is not in the family budget this year,” he says.

Lessons learned from talking about money

Going a step further, Sharon Lechter, former member of the President’s Advisory Council on Financial Literacy and co-author of Three Feet from Gold, recommends empowering children by igniting their entrepreneurial spirit. If they beg for a new toy, don’t reject them out of hand. Instead, Lechter says, “Ask them, ‘How can we afford it?’”

Lechter encourages parents to ask kids of all ages money questions, and has previously provided some suggestions to help you get started. Each day in May 2011, she posted questions ranging from “Do you know what your parents do to make money?” to “Does it feel good to buy something on sale?” These questions, as well as her casual parental guidance, are still available online.

Lechter also offers tools for youthpreneurs, or kids who run their own businesses. Kids are enterprising. Lechter reminds parents that creative, open minds often produce ideas that can expand a family’s income stream. That’s not only an empowering lesson for kids, but also for weary parents being forced to reinvent themselves.

Family financial stress isn’t exclusive to Mom and Dad; kids feel it, too, despite your best efforts to protect them. Younger kids mostly need honest reassurance that you have a plan to solve the problem and everything will be OK, while teens can handle a bigger dose of reality and learn from global economic turmoil. Positive conversation that adds perspective about our country’s long history of economic recovery and your family’s ability to bounce back may ease their fears.

Financial empowerment comes from talking about money

Simply understanding that they can make a living for themselves and actually create their own prosperity may go a long way toward easing those fears. Those lessons represent “the gift of a lifetime,” Lechter says, “because they learn that they don’t have to depend upon their parents or an employer or their government. They can create assets and make money on their own.”

That empowerment not only impacts a child’s future, but also their present. Faced with family spending cuts, Johnny, for example, may see how his lawn-mowing efforts can directly impact the family’s bottom line. In turn, he may elect to pay for his own iTunes downloads or, better yet, hold onto the money he earns and invest it to help pay for college. Guided by honest money talk from you, Johnny’s choices can be informed decisions based not on teenage angst or whim, but on a solid and responsible financial footing. 

If the math simply doesn’t work, parents must be prepared to disappoint their kids. Out-of-state or private school might be the dream, but the balance sheet doesn’t lie. It might say state university or community college is what’s feasible.

But while keeping the right kind of money talk on the table at home may improve a family’s financial odds, you never truly know where financial empowerment could lead in the long run. Johnny’s entrepreneurial efforts could surprise you, and you might just surprise yourself.

This article was published in February 2012 and has been updated. Photo by fizkes/Shutterstock