Who needs to know how much money you earn? Very few.
I was filling out my daughter’s Free Application for Federal Student Aid (FAFSA) when she asked a question that for years I’ve avoided answering.
“Mom, how much do you make?”
I froze. She’s the last of our three children to head off to college. The other two weren’t as curious. But this one, she’s the kid who wants to know everything.
My husband and I had made the decision not to share our income with the children when they were young. Initially, it was because we thought they might tell their friends or family members. Besides, at a young age, they didn’t really have a good grasp of money. To them, $20 was a lot of cash.
As the kids got older, we continued to keep the information secret because we didn’t want them to think we had so much that they could pressure us to buy them things. Your salary alone can seem enormous, but it is meaningless without the context of all your financial obligations.
But as we were going over the FAFSA form, my daughter kept asking why she couldn’t know how much I earn. I babbled a bit, but then I told her. Her reaction was more muted than I thought it would be.
Her question opened the door to another conversation about all the ways my salary and her father’s are chopped into pieces, including saving for her college education for the last 17 years.
She got it. And, she immediately said, “I won’t tell anyone.”
So much of personal finance is about these types of moments. Sure, I write frequently about the need to stay out of debt or save for retirement, but a lot of financial issues revolve around the personal dynamics of the dollars you do or don’t have.
This was the case in a question I received recently during my weekly online chat.
“My husband and I are blessed to have chosen careers that are very lucrative,” the reader wrote. “Based on how we live, no one would guess that we make as much as we do. My siblings all have modest incomes and there are frequent conversations about saving for retirement, buying properties, being able to afford this or that. It seems dishonest to lie about things being tight when we can really afford anything, but at the same time, I can’t let on to our income as it would unfortunately change a lot of relationships. Any advice? We in general just stay quiet about our finances.”
Who needs to know your income aside from the financial professionals you hire? Here’s who.
Your children: You’ll have to judge when the time is right, but I believe you should eventually share your earnings history with your children. However, the information needs to be presented in a way that helps them understand your gross isn’t your net.
Tell them about the impact of taxes. Discuss the danger of obligating too much of your income to debt. Have a conversation about the urgency of saving for an emergency and retirement. Throughout the years we were saving to send our children to college, we shared with them the balances in their 529 college savings plans.
Chat about the eventual separation of them from your money. Your children need to understand that although they benefit from your earnings while they are under your authority, once they’re grown, your money isn’t their money. The lines have to be drawn so that they don’t think Mom and Dad are their personal bankers.
By the way, your talks ought to be ongoing dialogues. Rome wasn’t built in a day, and neither are good money managers.
Not your parents/siblings/extended family/friends: Your income should remain private with one caveat — over the years, my husband and I have helped family and friends clean up their finances. It was necessary that they reveal their income and expenses so that we could assist them.
If you earn a lot relative to your relatives, you are not being dishonest if you join in on discussions about money being tight. Your degree of financial tightness may be different because you’ve placed your money in various pots based on your financial priorities.
Money or the knowledge of it can change the dynamics of a relationship. When people know you have a high income, they’ll make judgments on your unwillingness to spend the way they might. Your frugality can seem miserly to them.
But those words have different meanings. To be frugal means you are careful and intentional about your expenditures. A miser will live uncomfortably or is stingy in an effort to hoard money.
Here’s one of the top reasons to keep our salary secret unless someone really needs to know: You might find yourself pressured to be other people’s piggy bank.
Readers may write to Michelle Singletary at The Washington Post, 1301 K St. NW, Washington, D.C. 20071 or firstname.lastname@example.org. To read previous Color of Money columns, go to http://wapo.st/michelle-singletary.