Making sense of dollars & cents

• Article
• Comments ()
• Click-2-Listen
• Videos

By Ann Geracimos

Financial experts never seem at a loss for words when addressing the public about the economic crisis and how it's likely to affect the family pocketbook, but how do they fare at home, talking to their children?

The professionals interviewed agree that young folks have very literal minds and often are very conscious of what is going on around them even when they don't appear to care. They also are very sensitive to slights and to unfairness. Given these generalizations, what strategies have these experts adopted that might apply to others?

Before the recent meltdown, Janet Bodnar, a deputy editor of Kiplinger's Personal Finance magazine in Washington and author of a "Kids and Money" column, had outlined what approach to take with key groups, beginning at 3-year-olds and concluding with late teens and into college. In a telephone interview, she mentions that some of the same advice applies, saying that now — with money talk in the air — may be the best time to start.

Her own children literally grew up with her views on the subject. "I started writing about the subject in the '90s when they were younger," she says. "I learned as much from them as they from me and never cease to do so. They are older now — in their twenties. They are good money managers and they do it on their own. They have excellent credit and are paying student loans. We did an IRA Roth in college and invested in stock and mutual funds."

Was this too much immersion, perhaps? She says her children "aren't all that interested now in investing. I've been beating on them to add to their accounts. Small amounts of money when you are in your twenties is just going to grow."

Without a doubt, Ms. Bodnar says, "parents really do have power. You think as a parent they only listen to their peers or TV ads. That is simply not true. You have great influence over kids. Who else are they going to go to for advice? Studies reveal kids get knowledge from parents."

Not being too alarmist is common sense. "With young kids, you don't want to overload them with information. You have to decide what they are able to digest and what your personal situation might be," she says.

"It's really important to know the signals. Listen to what they are saying and, if they don't ask, you can turn the tables and ask them 'what do you make of this? Do you understand what is going on?' You don't have to get into lots of complexities. Kids very often need reassurance to be sure you are all right. It isn't a bad thing to tell them that if you want to cut back on debt you can say you aren't going to spend as much on holidays. Do it up front. Give kids fair warning so they aren't expecting more than they should, so they buy into the plan."

Even before the worst news hit, nearly 6,000 Prince George's County employees were told to give up two weeks of pay in order to help close a projected budget shortfall. A month earlier, 84,000 people lost their jobs across the country. Such measures are a jolt to any parents involved. Rick Kahler, president of a Midwest financial planning firm in Rapid City, S.D., that bears his name and author of "The Financial Wisdom of Ebenezer Scrooge," is concerned the subject of the psychological fallout in the home, as well he might be since his own children are 7 and 11.

He likes to talk in terms of what he calls a "money script" — the underlying beliefs and feelings people have about money that often go unexpressed. "By the time you are 5 or 10 years old, you have heard parents talking and not saying anything about money," he says. "You watch how they act — and see how they don't act. A kid has not got a filter. He can't say, 'This is strange behavior and I know that is not true.' "

Where child-parent relations are concerned, Mr. Kahler suggests that parents "first take a look at their own money script and how they act around money. Money is the big taboo subject, so parents should talk very factually about what is happening. Even saying, 'I don't understand what is happening.' When I was growing up, my mom would say every two weeks that 'things are going bad in dad's business and we may have to close the doors.' What is an 8-year-old to do with that? That is inappropriate. There is a fine balance between not talking at all and giving too many details."

He has been talking to his children about money since they were 4 or 5, he says. "It wasn't so long ago they asked me, 'Dad, how much do you earn?' One of my responses could have been, 'None of your business.' Another could have been 'about $1,000 a day' or any figure at all.

"What I did decide to say is the $1,000 figure, and they said, 'Wow,' but then I said, 'Let me tell you where it goes.' I put it into context and that was easier for them to understand."

He gives his children allowances and allows them to work and earn. He also has taught them that when they go to a store they only have a certain amount to spend and no more.

The economic crisis hasn't come up often in conversation, he says, but he doesn't go out of the way to avoid it. "I don't think we should protect the kids from what is going on. We don't want to just protect them and have them come back later and say, 'Why didn't you tell me?' We tell our kids to 'let your insides match your outsides.' "

As mother of a 12-year-old and 14-year-old, Patricia Seaman, an official of the National Endowment for Financial Education in Greenwood Village, Colo., is the baby-boomer middle generation between her own mother who was a child during the Great Depression and her own children, whom, she says, she has been instructing all along about the importance of saving for emergencies and not putting everything on credit cards.

"If I repeat teachable moments at frequent opportunities, it will sink in." She admits that "there is some eye rolling and some acknowledgment that 'mom is just cheap.' And to be honest, I haven't thought about the broader ramifications for the future because of this crisis." Her children have not noticed much about the issue "except in small ways," she says.

In part, that is because it is her own mother who reacts with worry and, even with a financial adviser, is "very, very nervous about why her investments are losing value." Ms. Seaman calls her own situation "the story of adult children who need to reassure senior parents."