Is your family facing a financial crunch? You're not alone. More than half (56%) of respondents to a survey by the American Psychological Association said their family had to make different choices due to lack of money in the past month. Whether you've lost your job or are simply tightening your belt to deal with inflation, children can sense when something is up—and hiding financial problems from your kids could make things worse. Explaining financial difficulties to your children could ease their concerns, but it's important to approach it correctly. Try these tips to discuss money problems with your children productively.
1. Come Up With a Plan
Before beginning your discussion, come up with a plan. Parents should be on the same page in terms of what to share (and not share) with the children, how to be honest without alarming them and how to handle questions that are likely to arise.
2. Choose the Right Setting
The best time and place to talk about money will vary from one family to another. If you have regular family meetings, for example, that's a natural time to broach the topic; if you don't, calling a meeting could seem scary for kids. Choose a period when no one is rushed or stressed, and allow plenty of time for the children to bring up any concerns or fears.
3. Consider Your Children's Ages
How you approach teens will be different from how you talk to preschoolers. Here are some things to keep in mind when talking to different age groups.
- Ages 5 and younger: Most children this age don't grasp the concept of money. Introduce it by explaining the value of different coins, that parents have jobs to earn money and that money pays for things the family needs. Share examples of things that cost money (like buying toys) and things that are free (like going to the park).
- Elementary school children: At this age, focus on the difference between needs and wants. For example, food, transportation and a home are needs, while a new game console or trip to an amusement park are wants. Ask the children to come up with some needs and wants of their own.
- Teenagers: While even very young children pick up on parental stress but maybe not the source, children in middle school or older may be more aware that your anxieties are money-related. They may have friends whose families are struggling or follow news about economic ups and downs. Correct any misunderstandings they may have and encourage them to limit their intake of news to reduce stress. Just as with younger children, you need to convey that you are in charge and have a plan to take care of them.
4. Let Children Guide the Discussion
Whatever their age, children will focus on how financial problems affect them personally. Your 6-year-old might ask whether Santa will come this year; your teen may ask if you'll be able to afford their college tuition or if they need to get a job to help support the family. Let children ask questions to guide your talk. This will surface their fears so you can address them. Focusing on answering their questions can also keep you from sharing more information than they need, potentially overwhelming or confusing the children.
5. Stay Positive
Money problems are stressful, but no matter how worried you may be, your children need to feel confident that their parents are taking steps to remedy the problems. For example, if you have lost your job, you could explain that you have less money to spend as a result. However, tell them you're looking for a new job, and in the meantime the family can adjust to the lower income by spending less on "wants." If your children express concerns about not being able to buy food or becoming homeless, share solutions you've thought of, such as getting financial help from government or community programs or moving in with a family member temporarily.
6. Involve Your Child in Solutions
Helping solve the family's problems can give children a sense of control. Make saving money a family activity by asking the kids to brainstorm ways they can cut costs. For example, if you can't afford summer camp this year, ask your children to come up with fun, free activities they could do instead. Need to cut back on streaming services or cable TV? Ask the children for their must-haves and the shows they can do without. You may be surprised at what your children are willing to forgo, and kids will be happier with the changes if they have a say in the decisions.
7. Make It a Teaching Opportunity
Family financial troubles can be an opportunity to educate children about managing money. Topics such as budgeting, comparison shopping to save money, looking for sales and discounts, building an emergency fund and using credit cards may all arise naturally as part of the discussion. Even young children can learn about these concepts. For example, at the grocery store, show your child how to read labels and prices to figure out which product is the best value. You can even discuss how getting a good education can give you more career options and potentially help you earn more money as an adult.
8. Keep Talking
Talking about family money troubles shouldn't be a one-time event. Make sure your children know they can come to you with questions at any time. Regular communication will help them feel secure and ease their worries. Once you've opened the discussion, it will be easier for both you and your children to raise the topic again.
9. Cultivate Closeness
Financial stress may make you want to withdraw, but your children need you more than ever now. No matter how busy you are, be sure to make extra time for your children. Hold family game or movie nights, cook together, snuggle up for bedtime stories, get outside and do other fun (and free) activities as a family. The more stable you can keep your children's routines, the more secure they will feel.
Give Your Family Credit
Good credit can make it easier to get loans, credit cards and even housing, giving you more financial options. Even when you're struggling financially, making payments on time is essential to maintaining your credit score. If you're having trouble paying your bills, consider getting credit counseling to help. Signing up for Experian's free credit monitoring service can help you stay on top of changes to your credit score, no matter how busy you are.