I was filling out my daughter’s Free Application for Federal Student Aid 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, because we thought they might tell their friends or family members.
As they 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 question opened the door to another conversation about all the ways my salary and her father’s is chopped into pieces, including saving for her college education for the last 17 years.
So much of personal finance is about these types of moments. 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.
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.
Chat about the eventual separation of them from your money.
• 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 make judgments on your unwillingness to spend the way they might. Your frugalness to them seems miserly. 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 needs to know: You might find yourself pressured to be other people’s piggybank.
