Money – Kids and money (Part III)

One of the tough questions that kids inevitably ask when they are curious about money is, “Mum, are we rich or poor”? And then, when you give the answer, “Why?” A well thought out and honest response is the best way to answer. Children when asking this are comparing their own situation to that of their friends. They are wondering why their friend Lucy gets to go overseas every school holidays when they just stay at home. They are wondering why their friend always seems to have the newest and best of everything.

Honesty is the key to satisfying their questions, however be aware that you should only provide as much information as your child can handle depending on their age. When they are older they will better understand the reasons you give. So the answer to the question are we rich or poor should always be, “Neither”. Even if you are rich, you don’t want your child growing up thinking that you or they can spend money on whatever they want. You will just turn them into a spoilt kid who expects everything on a plate. And conversely, if money is tight you don’t want them worrying about a roof over their head or where the food to eat is coming from. A better answer is to say something like, “We are somewhere in the middle, and there are people poorer than us and people richer than us” and add, “We have enough money to buy food, clothes and the things we need.”

Another common question is how much money do you earn? The best answer here is to never give the exact amount unless you want the whole neighbourhood to know (kids are extremely honest) but say something like, “I earn enough to buy the things we need, pay the mortgage and look after us all.” If you quote dollar values, kids will never understand, as they will compare what you said you earn to what they get as pocket money, and they will always think you are rich! For older children, this question is best turned into a learning experience by explaining what it takes to earn a good salary, and the role of education, hard work and planning to achieve financial goals.

“Why don’t we just get some more money or go to the ATM?” This is the question normally asked when you say “no” to, “can I have …?” Most kids really do think that money just comes out of a hole in the wall and you can get more at anytime. Explain that Mum or Dad go to work for money each week, that the place where they work puts the money into the bank to keep it safe and that they can only take out what they have earned. You can use this question to explain about savings.