When should you tell your kids how much money you have?

Today we'll be discussing when you should tell your kids how much money you have. Hello and welcome to Money Talks. My name is Ken Wink from Summit Financial Consulting. We'd love to have you visit our podcast page and check out past shows. You can subscribe on Apple Podcasts, Spotify or Amazon Music. You can reach us at 586-226-2100 or on our website summitfc.net. Today we'll be discussing when you should tell your kids how much money you have and how much you make. It's probably later than most children would want, and it's probably earlier than most parents think. We are constantly talking about investments with our kids. I want to get Jack and Charlotte very, very interested in investing and asking questions about everything. Everything related to investments, they are asking me, you know, how much money I make and how much money we have. And so far, I'm telling them absolutely nothing until they get much, much, much older. Charlotte's 14 and Jack's just turned 11 yesterday. So just trying to instill some good habits in them. And that's going to be a topic for today. But so things we're going to be covering is should your children know your income? Should they know your net worth? Should they know what they're likely going to inherit someday? Or should all this be kept private? There is not a perfect answer that works for every single family, but we're going to talk about some principles today that can help parents make what are hopefully wise decisions. But before we jump in, let me introduce my co-host, Tony Shore. Tony, have you talked to your kids about all the millions of dollars you're making as my podcast co-host?

Hey, let's not openly mock podcast co-hosts and the lack of funds they may or may not have. Yeah. Hey, you know, I've got a lot of things on order. Credit troubles. You know, they say radio show or podcast co-host doesn't mean anything. No. Wait a minute. You're not actually implying that I have to talk to my kids about how much money I have. Oh, my gosh, Ken. Wait, I have to talk to my children about money? No way. No way. My grandparents didn't do it. My parents didn't do it. And by gosh, even after seeing all their havoc and family disharmony that caused, I'm not going to do it. Oh, wait. No, I should. Right. Yeah, no, in fact, yeah, we're talking about talking to your kids about money, but that just leads, if you do tell your kids about your money and how money works, you're going to get this.

Oh, man, timely drop. Yeah, timely drop. That's what we call a TD in the business, a timely drop. Yeah, you coined it, Ken. Well, yeah, this sounds like a great topic, obviously. I don't make millions, but no matter how much or how little you make, A lot of people don't like talking about their money. And I think I was raised, you know, that's not, you don't talk to anyone, family members or anyone about money ever. And that was my grandparents. That were my parents. And you don't teach your kids any good money lessons. If you talked, my parents were great people. And my mom was actually really good with money. My dad was terrible with money. I mean, I don't mean to talk to them in the past tense. I'm just saying while I was growing up, they're still with us. And they are the greatest people. They are beloved by many and by all, really, who know them. But the epic fail for them and what I'm trying to avoid with my kids is not teaching them about the value – where they really failed me and where I don't want to fail my kids is teaching about the value of money. But your specific question, tell them how much money you have or don't have. People, this makes people uncomfortable. Just hearing that question, I bet, makes parents out there uncomfortable.

Yeah, I'm not trying to get everybody all cringed up here. We're definitely going to talk about exactly what you talked about. We talk about this almost every show, about how schools and the general education system do not teach kids anything about money.

No, and you know that's one of my big pet peeves. I think it should be one of the building blocks. It should be as important as math and reading. It should be taught from sixth grade on, and it should progress, and you should have to learn more and more. By the time you're a senior in high school, you should be a financial expert.

Well, and that's the problem is that a lot of adults enter adult, or a lot of kids enter adulthood with very little understanding of how money actually works. They don't know how investing works. So when it comes to these conversations about money, part of it is how much you make, part of it is what you're worth, and then part of it is just educating your kids. I think the best way that you can teach your kids is by example, you know. So in a lot of cases, if you tell, like, Charlotte's 14 years old, she's a teenager, everything that I say, I'm wrong, or she knows better, or, you know, sure. She, she turned, it started when she turned 13. Between years at 13, it begins, the struggle begins. Yes. Yeah, she's, she's Immediately got smarter than us, you know, between the ages of 12 and 13.

Something happens in their brains that tells them mom and dad are lame. So anything they say.

Right. So that's an uphill struggle, right? So like money is an emotional topic. Like you said, most of us grew up in houses where they just don't talk about it. So that's what I've decided to do since it seems like they're not always listening is we're just going to try to lead by example and give them a little. tidbits here and there. But, you know, you can create problems by sharing too much information, that's for sure. Like, you know, what if, especially if you're doing well, you know, what if this kid gets entitled or they lose some motivation to work hard or what happens if they tell their friends at school? So, you know, those are all very valid reasons to not touch it. But I think the number one goal for this whole conversation for today is not to teach numbers, but to lead by example. So, That's a really good message.

I like that. Plus, you can always teach them that, hey, we as a family unit are in this together. We want you to know what's going on. We don't talk about money outside the house with people. Yes. And we don't ever brag about how much we have or complain about how little we have. We just our situation is our situation. It doesn't matter what the neighbor's situation or your friend's family situation is. You don't talk about it with them, but we talk about it with each other. And leading by example is a good one, because like you say, if your kids are teenagers, they're not going to listen to you anyway. Most of them. I mean, I had three kids, two out of the three teenagers. they would listen to what we say. And then I was lucky. They never went through that stage or very little. The third is just still in that stage. He's smarter than.

Yeah. Well, maybe she's, maybe she's super smart. You know, it is. Maybe she's on point. Well, we'll find out. We will find out.

No, no, she's getting better as time goes. So.

Well, I feel like all kids just need to understand how income is earned, you know, and it usually involves hard work and sometimes a good education and good grades, how expenses work, why saving matters, why it's really important to invest as early as possible, how taxes work. So these are the kinds of lessons that you want to teach them, whether you got 100,000 to your name or 10 million. So those those values will come before the numbers.

Right. Right. So let's talk about some different ages, because you mentioned at the beginning of the show or have alluded to, I assume you don't want to tell you don't. There's no reason to pull a five year old out and say, here's how much money mommy and daddy have. That's not what we're talking about here, is it? I mean, what do you do at five to 10? Are there things you can do at five to 10 or you ignore the topic?

Yes. So you 100% do not tell them anything about how much money you have at that point. At that point, I think the most important thing you can do is give them some kind of an allowance tied to responsibilities, cleaning the room, vacuuming the house, maybe buckets or like jars to put money in for savings and spending, and, you know, just start to teach them budgeting. You can never teach budgeting at too young of an age, because that's arguably the most important skill you can give someone. The people who just go through life and spend everything and then with whatever's left over start saving, we've talked about that on 25 five shows. Like it does not end well. You got to pay yourself first. And we would also recommend setting aside money for charity on the front end too, or those who are less fortunate.

Yeah. Yeah. And then, and then let's go to the next stage bracket as they get older.

Yeah, so once kids are like 11 to 15, like these sort of teenage years, now we can start to talk a little bit more about some concepts. You know, this is where kids are starting to notice who has, you know, some families have bigger houses than other ones and some drive nicer cars and some go on vacations. You know, this is where you as a parent can start teaching some lessons, some lessons like, you know, yeah, I could afford a more expensive vehicle, but I'm choosing not to. You know, just a little statement like that can show them that you need to have restraint sometimes. And it's absolutely not about keeping up with the Joneses. You know, you can say, hey, I just want you to know I get a paycheck every two weeks and I'm saving 10 percent or 15 percent because saving money for the future is really important. What happens if mommy or daddy loses their job? You know, we don't want to lose our house. So we've got to set aside an emergency fund and have money for for something breaks.

Yeah. Yeah.

So, you know, just you definitely don't want to talk about your net worth or your income at that point, but you can start to, again, teach them concepts about being intentional with your money and not just spending all of it every single time you get it into your hot little hand.

Yeah, and I think, too, at that age and younger, at these younger ages, teaching them the value of money, like the value of waiting and saving up, saving instead of right now or, you know, priorities like tradeoffs and priorities. Like, you know, this would be fun to have right now, but in a week you probably won't care about it. You know, why don't you save for something bigger that will last?

You know, oh my gosh, we, Jack went through such a phase, uh, last year where he was playing a video game online, Fortnight. Oh yeah, very familiar with Fortnight. Yeah, with this birthday and everything, like, he just wanted all of his money to go towards what are called skins. It's basically like, I know, an outfit for the video game player to wear. Yeah, the amount of money that he spent on that, you know, and I just, I'm, I'm guilting him so bad, Tony. I'm like, Hey, remember last year when you spent all that money on clothes for your video game character and you don't even play that game anymore. Like, do you remember what a waste of money that was?

So like, think if you'd save that money and put it together with the money you have this year, what you could do with it. Right. Give them an example. Well, would you want a Corvette to drive? OK, no, you got to be realistic. But yeah, there are there are you got to teach them to prioritize. Right. And the value of money. And I think that's good that you pointed out that that situation. What's what about as they get older, like teenage years and early 20s?

Yeah, so I would say, like, 16 to 22, uh, this is where the real world begins, you know, once these kids are driving and working and going to college, getting jobs. And yeah, yeah, so this is where we got to get a little bit more specific, uh, start preparing them for adulthood. So talk about, especially once they're getting into college, household budgets, um, insurance costs, and what health insurance is, and just explaining what a mortgage is, and taxes, and setting money aside for retirement and investing. So a lot of young people are shocked when they learn how much life actually costs. All that stuff adds up, utilities and phone bills and especially health insurance. So again, a lot of families don't talk to their kids about any of this stuff. So highly, highly recommend that you start giving kids a little bit of a peek of what it is going to look like once they start getting older. So, you know, in 16, 17, we're talking about cars and auto insurance and food and, but also starting to save. You know, I always try to tell people, we ran those numbers. If a kid just saves $1,000 a year between the ages of 16 and 22 into a Roth IRA, and again, past performance can't predict future performance and no one knows, but in a lot of the scenarios we ran, just saving that $6,000 from ages 16 to 22 grew to half a million dollars when they retired.

Yeah, without ever adding anything else. No. That's after that. That's what's amazing about compounding interest. And if you can teach them that and get them to learn the value. One thing you didn't mention there, you talk about household budgets, insurance, mortgage payments, taxes. One thing that I found that actually gets especially teenagers to listen. And as my daughter turned 20, you know, we have three kids. So there's five of us. I brought out that T-Mobile bill, showed them what we're paying every single month for their cell phones. Right. And they all have to have the iPhone. Right. Every kid has one these days. And I think kids take that for granted because they're not paying the cell phone bills. They don't. They just assume this is something that everybody has and it's no big deal. And I tell them, you know, that phone costs a thousand dollars. They don't cost a thousand dollars. And I go, the latest model of iPhone that you have right in your hand is valued at between $800 and $1,200. And mom and I, we all have phones. That's five phones. Uh, so mom and dad are spending over $5,000 on the phones and then a monthly charge. And then they go, well, you didn't write that check. No, you spread it out in payments and then you pay more. It's just added into the phone bill, which is right here. And when you leave and we take you off our, our bill, you do that. And I'm like, yeah, when you're an adult, you will have to pay for your own phone bill. Well, it'll be much less. And I go, It's going to be at least seventy hundred dollars a month the way, you know, for what you want to pay for the phone and to pay for the service. And so I find that interesting. Cell phones is one great way to get them to just say, hey, you're going to have to when you hit 18, you're going to have to start paying for your own cell phone. I mean, whether you want to do that or not, tell them that and then tell them how much money they're going to have to have each month to pay that cell phone bill. I like and then insurance on their car. And yeah, I think it's really good.

Right. Yeah. Yeah. All of those are very anything you do to talk to your kids about money is better than not doing it. Yeah. Like whatever hits home for your kids. That's what you got to do. But just, yeah.

Let's get to the main question that you asked at the beginning of the show. And it's in the title. Should you tell your kids your net worth? What do you think, Ken?

Yeah, so obviously opinions often differ on this and some families are completely open with it and others prefer complete privacy. So again, we absolutely under no circumstances want to tell younger kids anything about your income or your net worth because it can create confusion or unrealistic expectations. You know, if a teenager happens to hear that mom and dad are worth a million bucks, they're going to probably think their own financial success is guaranteed. We do see it all the time where these kids of wealthy families, the kids just don't save an absolute dime and spend everything they make because they're planning on getting this inheritance down the road. So we don't want to do that. So, yeah, the most sensitive topic of all is just the inheritance. And should kids know what they might inherit someday? So this is talking to other financial advisors in the office here and then also talking to estate planning attorneys. This is what we ultimately decided is the best thing you can do. And that is don't speak to the kids specifically about dollar amounts, but instead say two things. One, we believe it's important that everyone stands on their own financially and saves on their own. So you're setting this expectation right from the get-go. But number two, we do plan to leave something behind for our family. So there will be something there.

Or maybe not. Say there's not going to be. Long-term care will eat it up, could eat it up. Talk to them about the realistic expectations.

Yes. Yeah. And that's that's an important thing, too, is that all best laid plans, you know, things can go wrong.

But no specific dollar amount is ever needed as long as you talk to them about how it's going to be divided up, what your intentions are and that you need to stand on your own. I mean, a lot of great lessons there from Warren Buffett on how he handles, you know, it's one of the top. richest men in the world. Uh, but he said, my kids, I'm not giving all this to my kids. They're not great. They have to stand on their own. And it's just like, can you imagine knowing your father is one of the richest in the world and you can't just rest on those laurels. You actually have to go out and work. Darn it.

No, I think if you follow that one-two punch of, you know, you got to stand on your own two feet, but also we're game planning for you to get something, but there's no guarantees there. I think it establishes some expectations, but it doesn't create dependency. And that's what we don't want is dependency. Yes. But there's, I mean, there's big problems with keeping everything secret, though, too, because if you just don't talk about it at all, the kids might just guess. You know, they might say, oh, man, look at mom and dad's house. You know, I don't have to worry about anything. Or they could learn it from the wrong places. You know, maybe they learn it from social media. And when I say social media, I mean other social media, not Summit Financial Consulting's amazing social media. Well, yeah, there's good and bad social media for sure, yeah. Yeah. Yeah. But if you know, if you don't talk about it, these kids are not going to be prepared for adulthood. They're going to be shocked when the financial realities of being adult arrive. You know, so we don't want these kids saying, I wish my parents taught me more about money. That's like you failed as a parent in some way. If your kids are saying that.

Yeah. Yeah. Yeah, I would agree because my parents succeeded in every other way. This was the one weakness that I wish they had taught me more about the value of money. And, hey, you can't rely on an inheritance. You're going to have to make it on your own. Here's what bills are. Here's what savings means. And, yeah. You know, I was an only child, so there was some spoiling going on, even with the grandparents and everything else. Right. So I thought instant gratification. Right. I want it. I should have it. And that, you know, it took me a long time to figure that out. And if I had figured it out when I was a kid, imagine how much better off I'd be today. Right. Like my daughter started putting money in a Roth, like I always say, when she was 21, because I told her and I showed her, you know, we're trying to show our youngest Anna, here's what your bills are going to be. She goes, oh, I'm I got a full time job now without I'm going to make it. I'm making great money. And I'm like, you only make money when you fly. Cause she's a flight attendant. They don't pay her full-time wage. It's only when you fly, you get paid hourly. She gets good hourly, but unless you're flying, you know, you have to fly a lot and work a lot and you don't always work. So you've got a lot of bills to pay. Oh, I've got enough. And then we sat down and said, you have to be, wait, I have to pay that. Wait, I have to pay for out of my check for my own health insurance. Can't you guys just cover that? It's like, Nope.

We're not going to. Yeah, it's a lot of my clients will say once their kids moved out, you know, now we're empty nesters. And we like to put a positive spin on it and say that as parents, we are bird launchers. You know, that's your whole goal is to get those kids out of the nest someday.

The angry birds game. You took that slingshot and shot that bird across. Well, there you go.

I think the best analogy that I can give for parenting is when it comes to finances is think of it like you're teaching someone to drive. You know, you would not just hand a 10 year old the keys to a car and send them on the freeway. And that's what you do not want to do when it comes to their financial life, too. You've got to teach them. how to have a trainer's permit, you know, teach them along the way how to budget, how to save, how to have an emergency fund, how to invest, what they can invest in. Money education works the same way as driving, if you ask me.

That's a great analogy. And you know what my wife and I did that we feel worked great with our kids? Half of everything they got No matter what, lemonade stands, gifts from grandma and grandpa or aunts and uncles if they got money for birthdays or Christmas, jobs, any type of job, even when they were young, babysitting, 50% goes into a 529 for your college. That's awesome. Fifty percent, half of everything you make goes, has to be put away and you can't touch it. It's either for college, a first home or, you know, college or a first home or retirement. One of those three. It can't be spent on anything else. It's not your money. It's future you. It's future Adam's money. It's future Allison's money. That's what we told them. It's future Anna's money. And two out of three were really good about doing that. And even all three did it. And for the most part. And so and we really were strict about it. Like I said, I want to see your savings statement, you know, or we're going to put this in the 529 we created for you. So and then they got used to just, OK, half of what I earned is mine to spend on whatever. And we said, be wise with that. But we also just said, hey, as long as you're putting 50 percent away, you can go go hog wild with that other.

Well, one of your favorite winks on earth, my brother Jim Wink. Oh, Jim Wink is the best wink you can get. No offense, Ken, or to your dad, but Jim, you know. For his son Wesley's birthday recently, he basically said, these kids have enough toys, let's just go 529. So many people might expect that from a financial advisor. Yes. I thought that was really great. That's hilarious. Yeah. You know, focus for the family too.

Yeah. Well, I think it's better when, if they know, if they have to give their, you know, get them used to giving up some of their money, not to spend, but to save and say, this is the rule. 50% of what you get from grandparents has to go here. And then if you can get the grandparents in it, say, I'm giving you $50 for your birthday. Yay. Here's 25. And the other $25,000 we put into your $529,000 college savings or a savings account or a CD for you or a MyGet so you can down the road use it to buy a house or pay for college or for retirement.

Absolutely. Right. I mean, I'd say the simple rules of thumb are teach money values early, teach financial skills as often as you can, especially when there's big things like allowances getting turned on or a first job. Yeah. You know, share details about yourself gradually as time goes on. Do not talk about you as parents. Don't talk about those specifics until later. you know, your child has the maturity and the responsibility to handle that. So again, we don't want the goal to be total secrecy. We want to be preparing. We want them to be capable adults who understand money, respect money, and of course, manage it wisely.

Manage it wisely. Well, Ken, that sounds great. And let our listeners know before we go, if they want a financial plan in place for themselves or set something up for their kids, they can come in and ask questions or get a consultation. How can they do that?

Yeah, give us a call at 586-226-2100 or visit our website, summitfc.net. We would love to help put together a financial plan for you. We'd love to help you figure out, are you on track for paying for college? How much should you save every single month for college? If you're a grandparent and want to help out your grandkids with college or help them fund their very first Roth IRA or even a Trump account, we can talk about the pros and cons of that. Whether you are a parent or a grandparent, I would argue the absolute best gift you can give your kids is how to handle money. I would say you got to tell them as often as you can set aside at least 10% of what you make for retirement, preferably 15 or 20%. If you just pound that into their head, you could set them up for an entire lifetime of success. So don't spend all that money on lifestyle or housing or cars or anything else. Pay yourself first. If there's anything you can say to every single kid every single time, you got to pay yourself first. You got to save before your lifestyle creep destroys your retirement.

Yeah, there you go. And you want your kids to get to a point where they're getting after you about it.

All right. Well, Ken, great show today. Listeners and viewers, remember, call 586-226-2100 or go to summitfc.net. And that does it for today's episode of Money Talks with Summit Financial Consulting LLC and our host, the man himself, Ken Wink. Thank you for joining us for Money Talks. Don't head into retirement without a strategy that addresses both income and taxes. For more information, please contact Ken Wink at Summit Financial, working with people you trust. Call 586-226-2100 or visit SummitFC.net. Join us again soon for another episode of Money Talks.