Your Family's Finances

Talking to Kids about Money Worries

It's a conversation most of us would rather avoid, but as with many things, being open and honest is the way to go

-Chris Miles

Are you saying no to spending by your children these days? Are you more worried, short-tempered? Have you lost a full-time or part-time job?

And though many parents would rather avoid talking to kids about money worries, experts say it can be even more important to do so in bad times than in good.

Your kids feel these changes, in your own family or in their friends' families, says Dr. Gwenn O'Keefe, a board-certified pediatrician in Massachusetts, editor-in-chief for the American Academy of Pediatrics' Council on Communication and Media's web site, and editor of PediatricsNow.com.

"No matter how old your kids are, you have to be honest with them and proactively let them know what's going on," O'Keefe says. Here are some suggestions for how to do it.

When is the right time to talk to them?
Today. The first thing to do is relieve your child's anxiety, no matter what your situation is. They see what is going on around them, in the home and with their friends. If your situation is fine, you need to tell them, "We're okay right now." If you have started to change your behavior to prepare for the future, you need to tell them why.

My husband and I still have jobs, but we've limited our spending a lot and eat out less. I remember we were in Stop & Shop a few weeks ago, and my 14-year-old daughter came right out and said, "Is something up?" And I realized we hadn't talked to her about why we were doing these things. I told her, "We don't know how long this recession is going to last, and we should be frugal."

We were doing these things as a precaution, whereas she saw a friend of hers making the same changes because her father just lost his job.

What if you have very young children?
As soon as they can ask a question, we owe it to our kids to explain things in an appropriate way. Say "This is why Mommy and Daddy are a little bit uptight now, but we are going to be fine." And as long as a child knows they are going to be fine, and that their mom and dad are going to be fine, it will help them cope with even difficult changes.

How do you explain the hard choices, like having to move?
If you end up having to sell your house and make major changes, as long as the kids are included in the loop as you are going through it, it will be easier, if not easy, on them. You can also seek out other help with explanations. I find the schools themselves are wonderful in helping kids of all ages negotiate through these transitions.

How can you help your child make do with less?
It's easy to feel that you have to pull out all of the activities your kids do that have fees to try to save money there. But it's important to continue, if you can, what they are most passionate about, so talk to them about making choices. Most schools will have some sort of scholarship for sports or activities, and you may be eligible for one. Maybe you can find a cheaper program.

Talk to your kids about trading allowances for a point system where they earn points or vouchers, so when they want to do something with their friends, as money allows, they can turn in a voucher for that.

For older kids, the good news is that there is no stigma about getting financial help from colleges. Very few people go to school without some kind of loans or scholarship or financial package. So if you have to apply or reapply, just make sure you have all your ducks in a row to address the family's new situation.

What if your child just tells you everything is fine with them when you think it isn't?
Believe them, but still ask them what's on their minds occasionally. Keep that channel of communication deliberately more open than usual during times of change like these. Or use a vignette from the news as a launch point to talk about your own family, and the child will still hear your message of reassurance.

Talking to kids about money worries is important to not only help them understand your family's current situation, but also to give them the tools to handle their own crises when they are adults.

Read more about today's money woes: When Will the Recession End? and Can Your Budget Afford Your Friends?