Q: Recently, I Told My 8-year-old Daughter That I Couldn't Afford Something, and She Said, "But You Work so Much!" What's the Best Way to Explain Where My Paycheck Goes?
A: Isn't it great when kids start to want an accounting of your wages? Love that. Fortunately, by now your daughter is old enough for a nuanced conversation about wants versus needs. At this age, kids basically understand that money is finite, so emphasize the role of choice, without blame or guilt. After all, it's not about what you buy (or she does, for that matter), it's about how you make those choices. If she tries to use your income as rationale for an expense, try saying "That's true, I work and get paid for it -- and aren't we lucky! But we still have to think about what's the best use for our money."
Then connect your financial decision-making process to her own: "Remember when you got that $25 from Grandma? You wanted X and Y, but you didn't have enough for both so you picked X." Depending on her desired item, you also may want to talk about whether it's something you could buy her later, something to save for, or a great birthday or holiday wish-list candidate. Wish lists can build useful skills: waiting, anticipating, and planning. Most grown-ups know that many yearnings, given time, will fade -- but children know only the immediacy of their cravings. Teach your kid to weigh what she wants versus the cost and the wait -- then she'll truly be a dollar ahead.
MP Dunleavey is our financial expert, author of Money Can Buy Happiness, and mom of a three-year-old. Send her questions at firstname.lastname@example.org.