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How To Talk to Your Children About Your Family's Financial Problems

When finances are tight, it's best to best honest with your children about the situation.
When finances are tight, it's best to best honest with your children about the situation.
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Anaheim Hills resident Jenny* will never forget the night her parents whisked her and her younger brothers out of their Corona house in the middle of the night, packed them into the station wagon, and drove 20 miles to Buena Park, where they ended up on her aunt’s doorstep, with nothing but their suitcases and the clothes on their backs.

It was 1981 and Jenny was 9-years-old. The United States was going through a deep recession that put millions of people like Jenny’s parents—a factory worker and an office clerk—out of work. They were evicted from their home when the bank foreclosed after months of missed payments.

“I’ll knew something was wrong, but I didn’t know what it was,” recalls Jenny now. “My parents were always fighting. My mom was always crying. I wish someone had told me the truth about our financial problems— then I would have been prepared.”

In 2010, with America barely beginning its recovery from the worst recession since the 1930s, many children are caught in the undertow of their parents’ financial problems. Often, parents try to hide their money woes from their children in the mistaken belief that they are protecting them. Children are perceptive; even if parents don’t openly speak about the fraying family budget, the children know something is going on. “Kids will see the worry on your face, the tension in your body,” explains Jan Faull, child development and behavior specialist and author of "Unplugging Power Struggles: Resolving Emotional Battles with Your Kids Ages 2 to 10."

Experts agree: it is important to share information about your financial challenges with your child, but you need to how much to share, and how to share it. According to clinical child psychologist Michelle New in her article “How to Talk to Kids When Money is Tight”, parents need to be honest with their children, but not give them so much information that they are frightened. Here are tips to help parents open up with their children about a difficult financial situation:

  • Consider the child’s age. The older the child, the more information they can handle. A preschooler only needs to know that mommy and daddy love him, and that his tummy will be full. A school age child can be told that restaurant dining and new clothes purchases are on hold for the time being, along with the reasons why. Teens, who may be discussing current events in school, can be given more details. A teenager may surprise you with valuable input on ways to trim the family budget. 
  • Use the crisis as a teaching moment. Explain mortgages, credit cards and banking in simple terms your school-aged or teen children can understand. Share with them ways the family can work together to build a stronger financial future. Children want to help; have a younger child help you clip and organize coupons. An older teen can look into alternative ways to pay college or trade school expenses. 
  • Reassure children that they are safe and that your family will get through the crisis. Even if you are losing your home, let your children that their security is your first priority. If you know the date you’re leaving your home, tell the children. Let them know what is going to happen: you’re moving into an apartment or going to stay with a friend. If they will change schools, spend some time with them researching their new school and talking about the best way to make the transition.
  • Allow your child to express their feelings. It is natural at some point for your child to feel like they are missing out, perhaps on a special toy, a trip, participation in a sport, or new clothes. Let them share what they are feeling. Allow them to cry—or even be angry. A financial change is difficult for everyone in the family. Your children need time to adjust, just like you do. So be patient with them, and always let them know how much you love them.
  • Focus on the positive. As dire as a situation may be, there is always something to be grateful for. Try this: in the evening, all the members of the family take a moment to share one thing they appreciate. Cutting out cable TV means more time for board games. Eating at home instead of a restaurant gives families the chance to cook together. An out of-work parent has more time to spend with the children. 

Jenny’s family was back on its’ feet after seven months of living with relatives. The most important lesson she took away from the experience of losing her family home is that parents need to be open with their children during stressful times. Now the mother of four daughters, she and her husband have been educating their children about finances since they were old enough to drop pennies in a piggy bank. “Money’s been a little tight the last two years,” she says. “We work together to make the most of what we have.”

*Name has been changed to protect Jenny's privacy

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