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Making Sense of Cents: Talking to Your Kids About the Economy

You’re not the only one feeling the pinch in these tough economic times. Children are quick to pick up on tension and anxiety in the household, even if they don’t completely understand the root causes.

Although most parents’ first instinct is to shield children from stress, research suggests that even young children sense when something is wrong. Experts advise keeping lines of communication open, making age-appropriate explanations and empowering children to develop solutions to family problems.

Try these tips for talking to your kids about changing finances:

Be Open

School age children may begin to hear news, financial and otherwise, from their peers, especially in areas of the country hardest hit by unemployment and foreclosures.  According to Diane Levin, Ph.D., professor of education at Wheelock College, the best strategy is to find out what kids already know and respond accordingly. Say to children, “There have been a lot of news stories about jobs and money lately. Is anyone at school talking about that?”

If your children haven’t heard about the crisis, explain the situation in simple terms, telling them only what they need to know and reassure them about their own security. If they do have questions, do your best to explain in clear terms the impact economic slowdown may have on your family. Don’t just lecture children, Levin advises, but rather make this a “give and take conversation,” taking special care to listen to any concerns they raise.

Make Age-Appropriate Explanations

All kids need to be reassured that they are safe and supported, but younger children may not be ready for a full explanation. Here are some options:

• Ages 0-4

  Infants, toddlers and preschoolers aren’t ready for detailed explanations of the financial crisis. They do need other forms of reassurance, especially if they detect stress and anxiety at home. Extra hugs and attention can make even the youngest feel more secure in tough times.

• Ages 5-9

  Children this age can’t put the pieces of a problem together, so it’s especially important to give them step-by-step explanations of any changes. “Mommy (or Daddy) lost her job but is working very hard to find a new one. We may need to move to a smaller house, but you will still go to the same school and sleep in your own bed and keep your toys.”

• Ages 10-13

  Older children are more aware of the news and ready for more details, but not so many that you create galloping anxiety. Be positive but realistic in your explanations. “You’ve seen the news about the economic problems in our town and across the country. I’m working very hard to get us through this, so I may have to work some extra hours at the office.”

Watch Your Words

Children are quick to overhear and misunderstand statements like “We’re going to the poor house,” or “I spent my last dime on that car repair,” so watch what you say around them. If you need to make adjustments in your family budget or move to a smaller home, be very specific about what it will mean for your family.

Empower Children

While you shouldn’t put added stress on children, you should enlist them as helpers in saving money. Doing so will give them a measure of control and help to relieve anxiety.
Here's how:

• Let them clip coupons for frequently-purchased grocery items or ask them to research local trips in place of a more elaborate vacation.
• Encourage them to make a list of things they can do to save money, like recycling drawing paper or drinking water instead of more expensive sports drinks or juice boxes.
• Ask them to collect rarely-used toys and other household items for a fund-raising garage sale.
• Remind them to borrow books and movies from the public library rather than purchasing them at a book or video store.

Small gestures will make them feel more in control and get them to appreciate the satisfaction that comes with spending wisely.

Stay on Schedule

If you do need to move to a smaller home, sell your car, or make other financial adjustments, do your best to maintain your child’s regular routine, including mealtimes and bed times.

Adjust Material Expectations

The silver lining in this economic crisis is the opportunity for families to reassess their values and reconsider what really matters. Regardless of the impact the economic slowdown may have on your family finances, this is an ideal time to talk to children about what you value other than consumer goods.

Watch for Signs of Stress

Be alert for children who display changes in sleep or appetite patterns, increased irritability or signs of isolation. These can all indicate anxiety that kids don’t know how to articulate.

Parents may be tempted to withdraw because of their own anxieties in times of financial stress, but this is the worst thing you can do for your children. Instead of retreating into your own worries, Levin advises that you set up a regular time to reconnect with your child. Set aside 30 minutes each day to play checkers, read stories or go to the playground. Reconnecting with your child doesn’t cost anything—and may be just what you both need to face lean days ahead.