I take some comfort in the fact that most parents are just like me. How much or how little Mom and Dad make is usually a closely guarded secret. (Yikes! What if the kids blurted it out to friends or neighbors?) But experts say that at some point it's important to explain the basics of money management. "I'm all for sheltering kids from the difficult parts of life when it's appropriate," says Alexander T. Vazsonyi, PhD, a professor of human development and family studies at Alabama's Auburn University. "But unless children are taught the cost of essentials like food, energy, and housing, how will they know?" And it's got to be put in a way they understand, he adds. For example, that new video game system your tween wants? Let him know it's equal to an entire month of the family's discretionary spending money.
Even if you aren't comfortable telling your child your salary, it's really useful to talk about choices and limits. You can start the conversation when your kids begin elementary school, explaining that most people get only so much every two weeks, and how they need to budget it to cover a wide range of expenses, including savings. Many experts suggest starting to give an allowance for regular chores around the house. Once kids get the opportunity to pocket a little cash by cutting grass or bringing in the neighbors' mail while they're on vacation, talk to them about how much they should spend, save, or donate to charity. Have your kids sit down with you every now and then while you write checks for the things they love most -- cable TV, phone service, the car -- so they can see how quickly a few thousand bucks dwindles to the low three digits.
And they need to know, because they burn through money like crazy. According to a study by Teenage Research Unlimited, based in Northbrook, Illinois, teens spend close to $160 billion a year (most of that coming from -- you guessed it -- the Bank of Mom and Dad). Even when teens hold down a job, they tend to spend all their earnings on clothes, cosmetics, electronics, music, and hanging out with friends. One study found that more than half of high-school kids with jobs say they make no contribution to the family's living expenses, and 23 percent say they contribute only a little.
Now that Maggie's working, we've had some intense conversations about who pays for what. My husband and I are happy to cover a certain amount for clothes, but beyond that, she knows she's on her own. (My son, Evan, 14, couldn't care less about what he wears, but when he lost a new pair of lacrosse cleats the first week of practice, he knew he'd have to spend his earnings from dog-sitting to replace them.) It's been a real education watching my little girl wade into financial reality. Because I had advanced Maggie some shopping money until paycheck No. 1 cleared, we had another first: She carefully wrote me a check for $50 and handed it over when we were in line at the bank. I admired her loopy signature and her printed name in the corner. I thought about preserving this milestone in her baby book, next to one of her teeth or her first report card. Then I just smiled and deposited it.