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Teach Kids About Money in a Financial Crisis

parents discussing money matters with child

"There are many kids in dire economic circumstances who do just fine because their families are supportive,” explains Keith Crnic, an expert in parent-child relationships and psychology department chair at Arizona State University. “It comes down to the quality of how parents manage the process for their kids and help them cope.”

Even in noncrisis situations, taking a mindful approach to talking about money will help you engage your children in talking about financial issues that might otherwise seem confusing, scary or simply boring. What’s more, involving your children in financial decisions can empower them to make sound financial choices in the future.

Crisis Communications

Perhaps you have lost your job, you are getting a divorce or medical bills have wiped out your savings. Your children need to understand how the financial implications will affect them, whether it will bring a big change such as moving to a new home or whether it merely requires a reworking of the budget that cuts spending on food, clothing, toys and activities.

Keep Your Cool

It’s hard not to explode or fall apart when you’re caught off guard by a big financial blow. “Try not to freak out in front of your kids, because they will freak out as well,” advises Crnic.

Make a Plan

Research avenues for support, including state and nonprofit assistance services, then map out possible solutions before you share bad news with your children. They will cope better with problems when they can see resolutions, says Crnic. (You may not be happy about taking a lower paying job or moving the family in with your parents, but these are resolutions nonetheless.)

Remind Your Children That You Have Each Other

You may not immediately know your next steps if you’re overwhelmed, anxious or stressed. However, you can reassure your children they still have you. “This is going to make them feel better even when they are losing a lot,” says Crnic. “If you have your parents, things are OK.”

Give Your Children Context

Particularly with young children, reading a book in which the characters’ experiences parallel their own can help normalize your situation as well as teach other money lessons. For instance, in “A Chair for My Mother,” author Vera B. Williams writes about a family that loses its home in a fire. Sesame Street Workshop’s “Families Stand Together” Kit provides a host of resources for helping families going through tough times.

Look for Teachable Moments

Even when your family isn’t experiencing money problems, talking with your children about money is vital for their understanding of key concepts such as savings and credit, and developing their confidence in making money-related decisions.

Start Young

“I don’t know if it’s ever too early for kids to understand basic concepts that things cost money,” says Crnic. “By 10 and 12, kids can grasp most financial concepts.”

Let preschoolers earn money or points for certain positive behaviors or chores. They can watch their savings accumulate and feel the payoff when they cash in on a special item or activity. When you tell your daughter “no” to a toy in the checkout line, don’t say you can’t afford it. Explain that you are choosing to spend money on other things. Talk about needs and wants.

Share Your Stories

Some adults avoid money conversations with their children because they don’t fully understand personal finance topics themselves. (Check out SAM's tools and resources to help.)

For others, the subject of money is taboo. However, your experiences with saving, investing, renting or buying a home, credit cards and everyday basics such as grocery shopping are opportunities to share lessons that resonate with your children, because those stories are real and personal. Just how much do you share? Crnic notes that just because you share some of your financial information doesn’t mean you have to justify every money-related decision you make.

Seize the Moment

Take advantage of relevant money moments that directly affect your children’s lives, says Crnic. Your daughter asks for a smartphone? Your teenage son asks for a car? These questions lead to dialogue about saving, budgeting, insurance, contracts and general responsibility. “To make the car a possibility, we can set parameters for what we expect kids to know and do before that can happen,” says Crnic.

You also can springboard from topics children raise about what they’re learning in school or stories about friends. Tell them the good and bad about current economic trends and how a stock market drop or new law may affect your community.

Interact, Engage, and Compromise

“Think about interacting [with], not preaching to your kids,” says Crnic. “Let your kids share their thoughts. Helping kids be capable decision makers is empowering for them.”

And that means, avoid always saying “no.” Listen to what your daughter has to say, “then make an informed decision — maybe not what you really want to do, but something you can live with,” advises Crnic.

“If your children see you as a reasonable person, they are more likely to talk to you about something else later,” says Crnic. “When children know their parents are interested in everything they’re doing, they may find it annoying, but they find it reassuring, too.”

[Any reference to a specific company, commercial product, process or service does not constitute or imply an endorsement or recommendation by the National Endowment for Financial Education.]