Talking to Your Kids about Difficult Financial Times

As a parent, one of your primary roles is to educate your children about how to live in the real world, and money management and problems are about as "real" as it gets. Here are some principles to consider as you enter into this vital discussion with your family.

Times Have Changed - It's Not Your Parents' World Anymore

Many of today's parents were raised in homes where discussion of money was "taboo." Some of us were told that the family finances were none of our business and some were "protected" from harsh reality during childhood. But our culture has changed, and it's now okay to talk about money.

The new generation of parents embraces a philosophy of more communication with children, partly because of an overall openness, and partly because they can't avoid it. Information is everywhere and it is nearly impossible to shelter children from the headlines anymore. Since our kids are bombarded with information, as parents we have a responsibility to filter and clarify it for them. If they don't understand what's going on, they're likely to become distressed or anxious about whether they, personally, have any control or whether they will be safe and secure.

Why We Need to Talk to Our Kids about Finances

Security and stability are essential to a child's sense of well-being. Yes, we live in ever-changing times and to some extent, children adapt. But parents must convey to their children that there are some things they can count on: We will always love you. We will always do our best to protect you. We will always make family decisions based on what's best for all of us. Of course those promises need to go beyond words to consistent action, and when your children see you living out these promises, they are more likely to remain hopeful and cooperative when the family has to weather financial storms.

Children are an important part of the family and deserve consideration when changes occur or bad things happen. They can sense when things aren't "right" or something is different. Since children tend to personalize events in their lives, they often feel that somehow they must be the cause of the stress or unhappiness they see in their parents. They may bottle up their fears in an effort to "not cause any more trouble" and become little carriers of stress. If kids are kept in the dark (even if the intent is to protect them), their fertile young imaginations often magnify problems, which only makes matters worse and may result in acting out in inappropriate behavior or suffering silently.

The best way to "protect" your children from the reality of financial problems is to help them understand what is happening and give them opportunity to be part of the solution. Financial struggles can also lay the groundwork for teaching your children money management and values.

How to Talk to Kids about Finances

So, if you have money problems and it's time to convene the family meeting to discuss it, here are some pointers to get you started.

Prepare in advance - Take time to think about what you want to say. If you are married, discuss the situation without the kids first to make sure you are both on the same page. If you go into the discussion with disagreement, you will likely send conflicting or mixed messages.

Be honest - Tell them how the family is being impacted, but strive to find the balance between too much and too little information.

Set aside plenty of uninterrupted time to talk - Discussion that's rushed or disjointed makes the situation seem even more stressful. A calm atmosphere will help children believe they will be all right.

Share age appropriate information using terms they can understand - Remember, younger children think in a concrete and literal fashion so telling them you lost your job might prompt them to ask why you can't go find it again.

Encourage questions - You can't assume you know what your children are thinking or worried about. Let them ask anything they want, and respond truthfully. They may ask:
"Why did you lose your job?"
"Will we be able to eat out?"
"What will I tell my friends?"
"Will we still be able stay in our house?"
"How can I go to college if you don't have a job?"

Get them involved - Kids and adults alike manage stressful situations best when they are actually doing something to address the issues. Brainstorm ideas for special new responsibilities they can handle to help the situation. For a teenager, it may involve getting a part-time job so he can pay for his own school fees, car insurance and clothing. Younger kids can help with household chores to give their parents time for job-hunting. Even pre-schoolers can contribute by becoming "morale officers" and giving Mommy or Daddy hugs and high-fives to help them feel happy and encouraged.

Children of all ages can be taught to conserve and save in practical ways. Leftovers can make another meal if they aren't tossed in the trash. Second hand stores can be great places to find clothes, books, CDs, toys and household items for a fraction of the cost (and, as a bonus, proceeds often benefit charitable organizations). Carpooling and bike-riding can save gas money for everyone. You might be surprised at the great ideas the youngsters come up with, too.

If your kids have a paycheck, babysitting money or an allowance, help them set up their own budget and include them in the family's financial goals like saving for vacation. Many families give their children advance notice of travel plans and let them know that the money each child will have to spend on souvenirs will be whatever they have saved. This same principle can apply to incidentals your kids want to buy or activities they want to participate in.

This can be a great opportunity to teach kids the difference between needs and wants. Most of us need to be reminded at times, too!

One thing to consider as you tighten your belts: if it is possible, let children participate in some of the activities that are most important to them. Sports, dance and other arts or educational activities are healthy outlets for the stress they may feel, and continuing with familiar schedules contributes to their adjustment. If necessary, talk to the teacher or leader to see if there is any option for a scholarship or discount.

Give them an overview of the family's plan - Start with the big picture plans such as steps you are taking to regain or stabilize the family's income and major changes like selling your house to downsize or move for a job opportunity. Take the time to help your children process any significant losses they may experience. Then cover the smaller details like reductions in expenses for dining out or movies, packing lunches, temporary suspension of expensive activities, etc.

Check in on them - Going through financial loss, job changes, schedule adjustments and the relationship challenges that often accompany stress is not a single event - it's a process. From time to time, hold family meetings to check in and evaluate how you're all doing and brainstorm new ideas. In addition to the family discussion, spend a little time individually with each child on a regular basis so he or she can talk about any feelings or concerns that are too personal for sharing in the group.

Be a good role model - The way you manage your own stress and make decisions during the hard times will be a major influence on how your children deal with the inevitable challenges they will experience all their lives. Financial strain becomes a true test of your character and an opportunity to pass your values on to the next generation. Control the urge to bad-mouth the boss or company that laid you off. Avoid accusing your spouse of causing the problem in front of the children. If there is a need to discuss destructive behavior, poor judgment or self-control issues, keep those conversations behind closed doors or in the office of a marriage or financial counselor. Don't declare yourself a loser and give up or blame others. Keep in mind that it doesn't take any money at all to conduct yourself with dignity and integrity.

Express hope and optimism - There is no doubt that financial struggles are a real problem and can be frustrating, discouraging and even devastating. But like any other situation, it doesn't have to stay this way. Keep reassuring your children - and yourself - that your current circumstances will change if you consistently take productive steps toward resolving the issue. If you get out of bed on time, take care of yourself and do at least one thing toward improving your financial situation every day, you will be that much closer to coming out on the other side.

Intentionally take good care of yourself. Eating healthy will fuel your body for the hard work of job-hunting, taking on a second job, or performing tasks you used to pay someone else to do (like washing your own car and doing your own yard work). Take brisk walks, which energize your body, help you generate ideas and give your brain a chance to work out plans.

Play with your kids. No matter how much or little money you have, your children will grow up to remember the warmth, security and fun of a family that laughs together. Stay connected with relatives and friends who encourage you and believe in you.

Yes, these are tough times financially for most people. But as you work together as a family, giving your kids the information and assurance they need and applying these practical strategies, you will improve your circumstances and help your children learn valuable lessons on the way.