Can You Talk To Your Children About Family Finances?

If you’re a parent during this recession, you may have questions on how to tell your children about your financial situation without scaring them unnecessarily. You can use the recession as a great history and economics lesson to help your children grow up with a better sense of money values. Explaining economics to kids doesn’t have to cause anxiety, and many times just communicating the needs of the family will help the kids to understand how they can contribute to the solution, instead of being part of the problem.

Too Many “I Wants”

Unfortunately, children have been bombarded with advertising since they were born. They may have grown up wanting the latest electronic gadget or designer clothes. If your budget has taken a nose dive, it’s time to educate the children on the difference between needs and wants. Set up a family meeting and discuss how the economy requires more discipline with financial matters, and set their expectations that things might be different. Many parents anguish unnecessarily over not being able to send a child to summer camp or giving them a car for graduation. These types of expenses are not needs, they are wants. Let them understand that financial management of the family means that basic needs for food, housing, and health costs are more important than keeping up with the Joneses.

Teach Your Children To Budget

It’s never too late to start teaching your children to budget. If they want a car, they can help to pay for it, either by contributing to the insurance or the cost of the car. If they are employed, you can help them set up a budget with the goal of matching their savings to make that large purchase that they want. This helps them to start understanding financial matters and sets up a good savings behavior by rewarding them at the end with something they really want. If you just hand over the keys, you’re wasting a valuable teaching opportunity. They may grow up to think that anytime they want something, all they need to do is ask for it. When they don’t get it that way, that sense of entitlement, will make them behave in ways that you won’t be proud of in the end.

Putting Them On The Same Page

When the family tightens its belt, it should be a joint effort. Children like to contribute and help the family when given the opportunity. Let them know how their actions help to support the family as a unit, and this will give them a sense of pride. Appreciate their efforts, no matter how small. Once they understand that money is tight, they won’t be so quick to ask for things they know are only going to stress you out. You may even be surprised at the innovative ways they find to obtain many of the things they want, but don’t necessarily need, without asking you for the money. This grows a self-sufficient, resourceful, individual who will carry good money habits on for the rest of their adult life.