When it comes to parenting, money is the last taboo

Like many parents, Heather Setka has struggled with the decision of whether or not to give her daughter an allowance.

Parents often struggle with the decision to give their children an allowance

"I think it's time for you to have an allowance."

I expected this grand proclamation to my eight-year-old would be met with applause, shrieks and giddy laughter. Instead, she stunned me with this: "I don't think I really need one."

What ensued was the oddest argument you've ever heard between parent and child. As I advocated for the allowance, she reasoned against. We actually came to an impasse when she finally stated, "I don't want an allowance, mommy."

Heather Setka finds money to be one of the hardest things to talk about with her child. (Heather Setka)

What do I make of this? Most kids her age and above, if you consider a recent study, are flush with cash. The American Institute of CPAs study, released in late summer, found that the average child's allowance provides "enough money in a year to afford an Apple iPad and three Kindles and still have money left over." That's $780 per year.

As parents, we often think that giving our kids money teaches them how to manage it. However, both the above-mentioned study and an annual one called the Parents, Kids and Money Survey from T. Rowe Price find that this approach may be doing more harm than good.

Handing over money doesn't work. It actually teaches entitlement. There are online games, but I wonder how effective those are. My daughter's online pet game clearly hasn't taught her anything real about having a pet, since she hasn't asked about her once-beloved digital dog for months.

So, how do you teach kids about money? Many of us grew up with clichées like "Money doesn't grow on trees" and "You know, I'm not made of money" barked at us from across the dinner table. We learned about money the way we learned about relationships and sex — by making mistakes.

Since I started my personal finance blog, cashgab, people have suggested this topic again and again as one I should write about. Many moms and dads have told me how they've approached financial literacy, while others have expressed interest in tips on how to go about it. I've avoided the topic altogether, because I don't know.

The missing link, according to every study, news source and blog post I found, is conversation. Rather than handing money over to our kids or even making them earn it, we have to talk about money. The T. Rowe Price survey found that close to half of parents are talking more often about money with their children.

That's good. But when it comes to their own financial worries, parents are unwilling to share. In fact, parents would rather talk about bullying, drugs, and smoking than financial matters. The fact that money ranks on par with talking about puberty shows just how taboo this topic is in our society, and our homes.

We want to protect our children, but isn't it better for them to learn from our mistakes than their own?

In further conversation with my daughter about her aversion to an allowance, I discovered that she doesn't want her own money to spend; she'd rather have unlimited access to mine. It looks like we have some talking to do.