'Are We Rich?'

When your kids ask if you're rich (or poor), what do you say? If you're like many Americans, you may cringe. "Before, money and sex were topics people wouldn't go near. Money still is," says developmental psychologist Nancy Kalish. "It's like the last taboo." Be brave. Here's how you can tackle the issue with your teens:

Figure out why kids are asking. Is the money question coming out of curiosity or anxiety? "If it comes out of anxiety, you want to be as reassuring as you can be about your financial situation," says psychologist Marsha Levy-Warren, author of The Adolescent Journey. Often kids' queries come out of personal concerns. Will they still be able to go to private school now that you've lost your job? Sometimes it's another teen's comment, says Levy-Warren. "For a rich kid you don't dress well," or, "Given where you live, I bet you're rich."

Be honest. "You can limit what you say. But whatever you say has to be true," says Levy-Warren. "If it's a wealthy family, say, 'We're fortunate. We do have resources.'" Or, by contrast, you can say, "'We have to work hard to support ourselves. We do not have a lot of resources financially, but we have other kinds of resources.'"

Know they're comparing themselves to their social circle. They don't necessarily care about the national average. "If their friends have pools in the backyard, and you have a comfortable life but you don't have a pool, the friends seem richer," says Kalish, an emeritus professor of psychology at California State University in Sacramento.

Bring up statistics. Without making your kids' eyes glaze over, you can briefly explain that last year about 44 million Americans lived below the U.S. government's poverty guideline — $22,050 for a family of four. If a child wants to know more, you can explain how people get low-income assistance benefits based on these income levels.

Talk about how money doesn't necessarily buy happiness. People can win the lottery and commit suicide. "Money can make you happier up until $75,000," says Kalish. "After that, it doesn't matter." Indeed, Princeton researchers reported this month in the Proceedings of the National Academy of Sciences that people's emotional well being increases along with their income until $75,000. If they earned more, they felt more successful — but not happier.

Let them know about college finances. "You can say, 'I have a college fund for you. Right now I can cover a year, and I'm trying to save more," says Kalish. Use kids' questions to briefly explain 529 college savings plans (and their tax advantages) and federal financial aid.

Cue up "If I Were a Rich Man." The "Fiddler on the Roof" tune is catchy, and the lyrics are worth discussing. If you were wealthy, would you really not "have to work hard"?

Don't make them feel too responsible. If you're strapped, make sure kids don't think  they're to blame. "You don't want to make it their problem," says clinical psychologist Thomas Merrill, co-author of Settle for More. That is, avoid conveying the message that "if you'd only saved your allowance, we'd have more," he says. 

Explain your values. Feel free to say that even if you were loaded, you wouldn't splurge on, say, a Chanel brooch or $1,400 Christian Louboitin shoes. But don't be too high and mighty about it. Talk about how every family — and every child — has different indulgences. Perhaps your teen is hooked on trendy clothes and desperately wants a new blazer. "If we can't afford the jacket, let's come up with a plan," says Kalish. "It's not just the jacket. That's what parents miss. The jacket is an identity, and the new jacket makes them fit in or not."

Turn questions into teachable moments. They're a great excuse to explain how mortgages and credit cards work. (Check out the Federal Reserve's site.) You can even bring up deferred gratification. (Remember the marshmallow study that asked kids to either eat one sugary confection right away — or wait and get two later?)

Make sure kids know it's not all about money. "It's how you feel about life and yourself," says psychologist Marcella Weiner, author of The Problem Is the Solution: A Jungian Approach to a Meaningful Life. "Then you're always rich."

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