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Family Finances

How Much Should Your Kids Know?

By Gina Roberts-Grey, LCSW

Having checks or debit/credit cards automatically equals having money to purchase anything is the most common belief of children. "Parents should explain that purchases made on a credit card have to be paid for," says Bruce Steffens, an investment banker in Morton Grove, Ill. Many children also believe that blank checks equal unlimited money. Steffens recommends a simple explanation. "Contact a local financial institution to schedule a tour for your child accompanied by a brief overview of bank accounts," he says. He further notes that understanding that checks do not equate to money can spare children a great deal of confusion.

There is a difference between teaching the economic efficiency of shutting off lights and overstating how expensive it is to raise or clothe children. "Kids can develop anxiety and increased levels of stress from financial troubles," says Dianna Derby, a child advocate specialist in McHenry, Ill. Derby works with low- to middle-income families and understands how adversely financial matters can affect a child's self-esteem and confidence, especially if the child begins to feel he or she is a burden on the family's wallet.

"I've seen how growing up with too much financial responsibility affects children later in life," Derby says. While their caring and concern for their family is commendable, many children grow to feel overly responsible for their family's financial matters. "That's when it becomes a much more serious problem," she says.