Protecting Children From Parental Financial Mistakes

Lela asks how much they should share with their 5-year-old daughter about their own financial mistakes without losing credibility with her. Dave explains how to pull it off.

QUESTION: Lela in New Mexico asks how much they should share with their 5-year-old daughter about their own financial mistakes without losing credibility with her. Dave explains how to pull it off.

ANSWER: Dave: I’m kind of old school about that. I want to be authentic, but I never endeavored to be my kids’ friend. I’m going to protect a 5-year-old a lot. They need a bubble, and Mom and Dad’s job is to create a bubble for them to live in as much as possible. There’s no reason to scare them.

You can always say, “Mom and Dad aren’t perfect, and we’ve made mistakes,” and that’s a good thing. We didn’t unpack our bankruptcy with our kids when they were 5. We unpacked it later, and it’s been a part of our public persona as they’ve grown up so they’ve known about it. Some of the ins and outs and the details of that—some of that stuff, the micro details, they’re still learning to this day. We were out to dinner the other night talking about, “Hey, that house over there got foreclosed on. I used to own that house.” We were pointing to some of the old properties we used to own before I hit the wall. I told the whole story about it, and they went, “Wow, I’ve never heard that part.”

You need a kid to be in adolescence before you really start unpacking major mistakes you’ve made because it’s not about you confessing to them. It’s about you using any mistake as a teachable moment to them.

Rachel: And even small mistakes—I think even being 10 years old and going to buy something and my mom saying, “Oh, Rachel, that actually is really inexpensive, so you can pay for it now, but I bought something just like that, and it broke the next day. So save up another week and buy something nicer.” There’s even those kinds of mistakes, or buying a car—that process—going with Dad to buy our first car and walking through, “Hey, I bought a car that had this, and I didn’t like it.” Kind of small teachable moments through purchases, I think, can be helpful. That’s more of the memories I have versus big, hairy mistakes that Mom and Dad made.

Dave: It’s okay to not—if your home’s in the middle of foreclosure and you’re moving and your child is 4—for your child, that’s just an adventure. It’s not the family’s all coming to an end and we’ve lost our home and we’re all going to sit in the street and cry. And let’s all hold hands and sing Kumbaya. The world is coming to an end. You don’t do that to a 4-year-old, for goodness’ sakes. You’re supposed to be the big people here. You just . . . “Hey, we’re changing houses.”

“Why? I like our house.”

“Yeah, but it’s an adventure. We’re changing houses.”

If you’re going to cry, you do that behind a closed door later.

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