Think you don't lie to your kids about money? A typical dishonest scenario is all too common: A parent says "No" to a $10 item, claiming not to have enough money, but then places a $15 trinket in the shopping cart for himself.
"When you say you can't afford something when you really can, you're missing the opportunity to talk about priorities or trade-offs," says Stuart Ritter, a vice president at T. Rowe Price and a father of three. "Kids are perceptive, and I think we underestimate their readiness to learn this stuff, and their ability to pick up on what you and I are doing."
Ritter, an expert on family financial education, was involved in a study for the company released in late March called the "Parents, Kids & Money Survey." In this year's report, the firm set out to interview more than 800 children ages 8 to 14, in addition to 1,008 parents (split evenly between moms and dads).
The Baltimore-based investment firm found, among other things, that parents have just as tough a time talking money with their kids as they do teaching them about sex.
They have such a hard time, in fact, that they lie about or avoid money topics on a regular basis, even though in many cases, their kids know something's up. One-third of parents reported that they avoid conversations with their children about money.
One of those big avoidance topics is mother-father disagreements on money matters. While 46 percent of parents report this as an issue, 42 percent of kids said they were aware of such conflicts.
What's more, 77 percent of parents said they aren't always honest with their kids about money, with 15 percent not telling the truth at least weekly. Most commonly, 43 percent of parents report being dishonest about how worried they are about money, while 32 percent tell kids they can't afford something when they really can.
In personal finance, you'll find no shortage of studies about family money matters. Earlier this month, Junior Achievement and the Allstate Foundation released their Teens and Personal Finance survey, in which 56 percent of teenagers predicted they will be as financially well-off or better than their parents - a 37 percent drop from 2011's 89 percent.
PSYCHOLOGY
That parents struggle with talking money makes sense to those who study the issue from a psychological angle. Gustavo Carlo, a professor who teaches child behavior and development at the University of Missouri, co-authored a 2011 study that showed parent/child ties are hurt by money worries at home. Parents feel less connected to children and children face higher depression rates — with poor communication at the root of it all.
"My sense is we're not aware of the messages we are sending," Carlo says. "If parents, for example, decide to get something for the kid that he wants, that does not mean that the family is in a good financial situation. But that may be exactly the message that the kids gets."
Further, parents do a less-than-adequate job explaining how their roles work.
"We can't just assume that children understand all of the decision-making that parents go through, or the amount of work the fathers and mothers do to provide for their family," Carlo says. "Parents need to communicate and talk to their children, so the misunderstandings are minimized."
When it comes to parents trying to sugar-coat financial distress at home, "you are not fooling anyone - especially the kids," says Susan Beacham, founder of Money Savvy Generation, a Chicago-area company develops products that teach basic personal finance skills to school-age children.
In her children's book "Home Sweet Home," co-authored by Lynnette Khalfani Cox, a child confronts the reality that her family is in financial trouble and they might lose their home. Beacham based that character's struggle on what she sees in her practice: When parents hide information from kids, it makes them "more anxious, not less."
GROWING ON TREES
What kids believe about money proves parents have a long way to go in their teaching; 22 percent say a safe deposit box is the best place to put money when you want it to grow over time. In other instances, they embrace modern-day variations of the myth that money grows on trees.
Ritter recalls how recently, his 6-year-old daughter asked for her own credit card. When he asked why, she replied without missing a beat: "'Because if I have a credit card, I can go into a store and get whatever I want.'"
Yet kids look up to their parents enough to give them higher grades as financial guides than parents give themselves. Forty-four percent of kids give parents an A (and an overall grade of B+), whereas 17 percent of parents give themselves an A (and an overall grade of B-).
"It's so much easier to say we don't know, when really we may mean that we don't know where to start," says Lule Demmissie, managing director of investment products and retirement for TD Ameritrade.
Rather than dismiss awkward or big financial questions, she suggests parents engage the curiosity of kids and make it a learning adventure for all.
Even if parents have a stable financial life, it doesn't help that they harbor some strange beliefs themselves, the T. Rowe Price study found. The number of parents who think Social Security will be available in its current form when their kids retire: 26 percent. The number who think life exists on other planets: more than double, at 59 percent.
(The author is a Reuters contributor. All opinions expressed are his own.)
