Should You Talk to Your Kids About Your Money Struggles?

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Let's say you're having some money troubles. Maybe your spouse has been laid off; maybe you're under a mountain of debt. Whatever the situation, it's affecting your whole family, but you're not sure how much information you should share with your children -- or if you should tell them anything about the situation at all. Here are the most common arguments, pro and con.

Disadvantages to Discussing Your Financial Struggles
  • Confusion. It could overwhelm your children.
  • Helplessness. It may put unnecessary stress and worry on their shoulders, given that there's not much action they can take about the situation.
  • Jumping to conclusions. They may worry about the family losing everything or becoming homeless.
  • Guilt. The situation isn't their fault, yet they may internalize the blame and feel guilty about anything you've purchased for them, thinking it contributed to the problem.
  • Growing up Fast. Kids need to be kids. It's your duty as a parent to shield them from negatives, and the family finances are none of their business.
Benefits of Having the "Money Talk"
  • Understanding. It helps your child grasp why they can't have certain things. A broad "because I said so" is frustrating, but if they know money is limited, and every purchase necessitates a trade-off against something else, they'll have more context and understanding for why they can't buy that toy or get that fast food meal.
  • Reverse role modeling. They can learn from your mistakes and how you overcome challenges. Seeing the stress you're under teaches them about consequences and dealing with adversity.
  • Applied financial lessons. It's an opportunity to teach them the building blocks of money management, like budgeting and saving.
  • Jumping to conclusions. Kids are smarter and stronger than we give them credit for. Chances are that your children can already sense that something's up. It's better to clue them in on some details than let their imaginations run wild with all sorts of horrible possibilities for why you're so stressed all the time.
The Verdict?

If your financial troubles are impacting your children, or they've begun to notice something is bothering you, it's time to be honest with them -- to a limited degree. How can you handle the conversation? I've prepared a free guide and want to highlight these points.

What to Say -- and What Not to Say
  • Give your child enough information to understand the basics. "Mommy lost her job, so we don't have as much money to spend right now" or "Daddy spent more than he earned, and now he needs to pay back his credit card debt."
  • Skip the gory details. They don't need to know exactly how much you owe, along with the interest rate and payment terms. Just provide enough information for your children to understand why money is tight right now. Younger kids obviously need only the bare minimum, while older children can handle more information -- and may actually benefit from it as a cautionary tale.
  • Don't scare your kids. There's no reason to tell them you're on the cusp of a foreclosure. Wait until you know whether or not you're actually getting foreclosed upon before you put that type of worry on their shoulders. Let them know that things are not great right now, but temper that information by also letting them know what you're doing to fix matters.
  • Let them know how they can help out. Children enjoy being helpful, and they'll appreciate the opportunity to pitch in. For instance, they could narrow down their list of birthday gifts.
Remember, kids are incredibly perceptive. They're curious about what's going on around them and they're excellent at picking up signs you're not being upfront with them. While no one wants to share bad news like money troubles with their kids, your children deserve to know what's happening and why. Honesty -- and carefully -- giving them some information is always the best policy.

Paula Pant ditched her 9-to-5 job in 2008. She's traveled to 32 countries, owns seven rental property units and runs a business from her laptop. Her blog, Afford Anything, is a gathering spot for rebels who refuse to say, "I can't afford it."
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