Should I Talk to My Kids About Our Family's Money Problems?

Financial difficulties can be difficult to navigate for the most stable family. Parents Ask Your Mom columnist, Emily Edlynn, Ph.D., shares some tips for talking about money woes with your kids.

Money Woes
Photo: Parents | Zoe Hansen

-Money Woes

Because of recent money troubles—and perhaps a pending recession—my partner and I have decided to scale back on some expenses, including some of our daughters' extracurricular activities. As any parent knows, that budget can balloon quickly. We asked them each to pick two things they want to actually focus on and cultivate. But the news didn't go over well. How do we talk to our 9- and 13-year-old about money and saving in a way they can understand?

—-Money Woes

I have found that many parents mostly ignore money as part of parenting, either because of growing up with it as a taboo topic or simply because money is stressful. But addressing money and family finances with our children can teach skills that will help them be financially competent adults. So, as uncomfortable as it may feel to talk money with our kids, it's worth it when we view it as part of nurturing critical skills for future self-sufficiency.

I imagine your current dilemma is ringing true for many families in our current economic climate. The cost of kids' activities seems to be rising at a pace that seems higher than general inflation, which is already taking a sizeable bite out of the monthly family budget for groceries and other essentials. I applaud you for involving your kids in decision-making because it shows your children that you are affected as a family, and will make sacrifices as a family. I often hear the complaint that "children these days" seem so entitled, but one way to avoid this is not sparing your children the reality of making hard choices.

Family Finances—Share or Stay Silent?

In Ron Lieber's invaluable book about parenting and money, The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money, he preaches the importance of being open about family finances. Many of today's parents grew up in families where talking about money was considered impolite or offensive, so it may feel uncomfortable to talk about money with our kids. But Lieber reminds us that "every conversation about money is also about values." As you and your partner navigate your current financial situation, you are modeling values of taking responsibility and living within your means. Talking about this openly with your children ties these money decisions to teachable values.

Tips for the Money Talk

I'm not sure if you already let your daughters know that the reason for scaling back on their extracurriculars is for your family to save more money, but here are some tips for having money conversations with kids:

  • At ages 9 and 13, your kids can understand the concept of a budget: in order to save more money, your family needs to spend less money. When kids start asking more detailed questions like, "how much money do you make?" Lieber recommends orienting them to household expenses for context. A salary may sound high until they realize all the money required for daily life. If you haven't shared the cost of their extracurriculars, doing so, along with the cost of other household expenses, will have more impact.
  • It's a great opportunity to start discussing the difference between "wants" and "needs." This distinction is important for lifelong budgeting practices, as we all know! (Do I need this $10 latte?) Your daughters may enjoy all of their extracurriculars, but these usually qualify as "wants" (despite the reality of so many over-scheduled kids in today's world).
  • Share the reality of your family finances, without placing stress on your children. You can be honest about financial strain, but in a way that communicates the adults have a plan and know what to do so the children don't take on the worry. This seems to be the case for your family, where you and your partner see how to achieve more financial stability, and you are taking steps to do it. This in itself can be a great template if your children face their own financial insecurity as adults.
  • Deliver information in bite-sized pieces, and allow time for their questions. You want to make sure they have a chance to process what they are hearing, and that they understand what you're sharing. Hearing their questions also helps you gauge if they are making leaps of logic that will stress them out. ("Does this mean we're going to move?")

Remember that kids are naturally curious, and resourceful. If they have money questions that you don't answer honestly, they may find out another way.

The Family That Financial Plans Together...

Even though as parents you are in charge of your family finances, including how to solve budget dilemmas, you can still involve your children in ways that teach and empower them. Although they may not have a choice about cutting down on extracurriculars, your kids might have their own ideas about ways to save money, or even earn their own money to relieve some of your expenses. Of course you are not relying on your children for income, but earning their own spending money through creative entrepreneurship helps them feel more mastery and competence when they covet their next tech gadget. They can learn to save money for a desired goal, and then buy it without asking you to pay for it.

The Benefits of Fewer Extracurriculars

Even though this wasn't the purpose of your question, I want to take a moment to point out that decreasing extracurricular activities has benefits beyond financial savings. I know it's an adjustment for your children, but I worry about so many kids whose time in extracurriculars comes at the expense of down time, family time, and sleep! I don't know your family's schedule, but finding new, free ways to enjoy the time they would usually be in extracurriculars may help this transition. Maybe there's finally time for a weekly game night, or a family show to all watch together.

The Bottom Line

This season of financial cutbacks for your family has the potential to teach your children important money lessons, instill values, and open up more free time. In the process of making tough choices, you communicate openness instead of secrecy about family finances, and help your children feel like valued members of the family. Even as they may struggle with the change of fewer extracurriculars, your children may make discoveries like new entrepreneurial skills or the benefits of more downtime. Ultimately, you all may realize that this budget change ended up as more of an opportunity than a sacrifice.

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