Let's face it, who really wants to be asked, "How much does our house cost?" or "How much money do you make?" over dinner by a 7-year-old. The best approach is an even-keeled response. Don't feel compelled to name your salary, but try not to shut down the conversation either. "Kids lack a frame of reference, so if your answer is $30,000 or $130,000, neither would be meaningful," says Bodnar. She suggests offering a more general statement of reassurance, such as "We have enough to live comfortably and buy the things we need for every day." When it comes to spending decisions, get into more specifics and share some of your reasoning. "Kids this age often think that since you're a grown-up you can have anything you want," says Dr. Balter. "There are big benefits to explaining how you didn't buy something you wanted because it was too expensive. They should hear about how you have to wrestle with difficult decisions like that."
Finally, make the learning fun. Play board games together that involve money, such as Monopoly Junior, Payday, The Game of Life, and The Allowance Game. "These are money-management courses in a box," says Bodnar. Between real-world experiences and pretend-cash crash courses, you'll decrease your chances of raising a big spender while investing in helping your child become a savvy money manager.
Originally published in the November 2010 issue of Parents magazine.