Study: Income Is Not a Family Affair for Americans

Discussing salary with friends and family is not easy for Americans, as only 11 percent say they would feel comfortable sharing their salary dinner party. Personal finance is largely considered taboo; however, modern families are changing how they approach the topic of income by teaching their children about money at a younger age. As a child can learn about the true value of money and the impact of a salary, we polled Americans to see how income is and should be discussed.

Our poll of over 4,000 Americans revealed that:

• Only 16 percent knew how much their parents made while growing up.
• 1 in 5 think children should know how much their parents are making.
• 76 percent say it’s best for parents to hide financial distress from children.
• Even as adults, only 17 percent currently know how much their parents make.

Although 87 percent of parents think financial literacy should be taught in school, only 16 percent of Americans knew how much their parents made while growing up.

Income can be a difficult topic to discuss with children, as they lack a basis for comparison. Disclosing an exact number can open up the larger topic of budgeting, which can be a helpful starting point. However, there can be some drawbacks to disclosing your salary to a child without the proper context.

“Most kids really don’t understand the value of money” says Dr. Jason Cabler of Celebrating Financial Freedom. “To a child, a below average salary of $30,000 might sound like a huge amount of money! Conversely, a $200,000 salary may seem like poverty wages to a kid living in the smallest house in a neighborhood full of mansions.” Dr. Cabler says.

Historically, parents leave money conversations to schools where the topic can be approached with additional insight and comparison. Although most Americans did not know their parent’s income growing up, do they think kids today should?

1 of 5 Americans say children should know parents’ income

As parents are spending more time on educational tasks with their children, including discussing personal finances, we expected to see more Americans considering it appropriate for a parent to disclose their income to their children.

When asked if children should know how much money their parents are making, only 22 percent of Americans responded that income was appropriate to disclose to a child. Not all too far off from the number of Americans who knew their parents income growing up.

A survey by T. Row Price found that 52 percent of American parents did not disclose family financials to their children simply because they did not want to worry them. An additional 32 percent responded that their children would not understand and 13 percent responded that it was none of their children’s business.

Even as adults, Americans still don’t know how much their parents make

Although the majority of Americans agree that children should not know their parents income, do parents eventually open up to their children about salary? As children lack the understanding which lets them compare income, surely as a teenager, early adult, or an adult, parents find the opportunity to share their salary.

Our survey found only 17 percent of Americans over the age of 18 with parents that are currently employed know how much their parents are making.

As such a low number of adults know what their parents currently make, it seems American parents are not finding the right time to truly discuss financials with their kids.

“As children near their college years this should be a family discussion in regards to college planning.” says State Bank Vice President Kameron Helmuth when asked if children should know how much their parents are making. “Parents setting expectations for their children and talking through that they may/may not qualify for financial assistance because of their income and or assets is important” Helmuth says.

1 of 4 Americans say you should tell your child when money is tight

Losing a job, going into debt, taking on medical bills or any form of financial hardship can cause a lot of pain to the whole family. As many aspects of a child’s life will change as parents go through financial hardships, there is a debate on whether a child should know or find out themselves. Telling a child when their family is experiencing money problems is upfront but could cause unwanted stress.

Although financial hardships can be a great teaching moment, only one of four Americans say children should know if a parent is experiencing financial distress.

“Moments of financial distress can be used as excellent teaching tools after they have been circumvented.” Says Commonwealth Financial Advisor Parker Babbe. “I strongly believe that parents should share with their children the mistakes that they have made financially and what they learned from it, to hopefully give their children an example of what not to do.”

Making your way out of financial distress is a great teaching experience, showcasing positive budgeting habits and the true value of money. Although small financial setbacks could quickly be averted, most American parents agree that children should be shielded from any financial stress.

Our data shows that older Americans are more open to disclosing financial distress to children than younger Americans. With more experience though economic recessions and downturns, it shows wisdom does affect how open Americans are about financial distress.

With income inequality becoming a more readily discussed topic in America, there can be a large benefit to parents being upfront about salary with their children. Finding the right age and time to discuss income can completely depend on what feels right, but it is most importantly about education. With changing expectations for the American dream and what it means to be middle class in America, passing on important financial lessons and advice to children can have a largely positive impact on their future choices.