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The art of financial empowerment: Talking to our kids about money

There’s no scientific formula we can use to decide whether or not we should share our financial concerns with our children. It really depends on the situation, the people involved and the family’s values, says developmental psychologist Richard Cloutier.

He says that even though there’s no general rule, there are principles that we can use as parents to make informed decisions when it comes time to talk about money with our kids, whether or not we have financial concerns.

Principle 1: Don’t give them too much responsibility

Children don’t need to know about adult concerns that are beyond their ability to deal with, as they aren’t able to grasp these kinds of financial realities. Burdening them with financial concerns is the opposite of true power and can only result in anxiety. Cloutier says that even if we don’t share our financial worries with our kids, they’ll still know what’s going on, because they’ll automatically feel our stress.

Principle 2: Don’t give them too little responsibility

At the other end of the spectrum, sheltering children entirely from real concerns doesn’t help them from a personal development standpoint, either. According to Cloutier, kids understand more than we think; we just have to place limits on what we share

That means that if we give kids too little responsibility and say yes to whatever their heart desires, they never acquire the concrete experiences they need to learn. If they aren’t aware of financial constraints, we can’t expect that overnight, they’ll be able to manage their finances. He says that we should gradually provide our children with experiences commensurate with their abilities.

Principle 3: Finding balance

Independence comes with experience. The more gradually kids are given the kinds of experiences and opportunities they need to learn how to manage money and finances— experiences that correspond to their abilities—the greater autonomy they’ll develop over time, says Cloutier.

Even though we don’t have to bring up financial concerns directly, as parents, we can still talk about the general cost of things. Children need to realize that things aren’t free and don’t just magically appear. Even though they have no financial power, they can still understand how it all works. So it’s good if they can see that there’s a family budget, and that certain things may or may not fit into it, Cloutier says.

It’s even better if kids get involved by making decisions and contributing to a family project. For example, he says that some parents ask their kids to save for family vacations. Even if they contribute very little, by paying their share, they get a say on the destination, how long to go for, gifts they can buy, etc.

At the same time, children are becoming aware of the reality of choices and constraints; they’re learning that they can’t have everything and that they need to make compromises.

According to Cloutier, having decision-making power is very validating for children. Beyond the issue of money, there are several benefits. It’s not just about being able to pay their way, but about participating in a group decision. Giving, helping, participating, making an effort, giving a bit of themselves—all of these things are important for a child’s development. Being able to pay for something, even if it costs very little, marks the beginning of the road toward independence, he says.