How to Talk To a Child about Finances When Money Is Tight

When a family faces financial difficulties, it’s always easier to get the situation under control when the entire family works together to get back on track. Although a lot of parents would rather protect their children from knowing that the family is in a tight spot financially, such a situation can be a great time to teach children a lesson about finances. This will prepare them to handle their money responsibly as they grow into adulthood. Naturally, age affects how much information children should receive regarding the family’s finances.

Unless you’ve been in seclusion, you know that times are tough for a lot of people. Many families are on tight budgets and must scale back on expenses. Meanwhile, children are still clamoring for the latest video games, the hottest new toys, and designer clothes. How do you teach children that the family must stick to a budget? Here are some tips.

Hold a family meeting to explain the situation honestly but optimistically. For instance, you might say, “Mommy’s office closed down, and Mommy isn’t working there anymore. Mommy’s hoping to find a new job soon, but in the meantime, let’s talk about ways in which we can save some money until Mommy has a new job.” You want to tell your children the truth without scaring them unnecessarily.

This is a family issue, so always promote togetherness. Make sure the children know that you’re making sacrifices, too. Let them know if you have, for instance, given up your daily Starbucks run, cut back on clothing purchases, or started clipping coupons.

Encourage inexpensive activities and show your children that fun doesn’t have to cost a lot. Visit parks, the library, and the local nature center; play flag football in the yard; or go bike riding. Check your local newspaper to find events that are free or inexpensive.

Don’t feel guilty about setting limits. Despite what your children might tell you, it won’t be the end of the world if they don’t have the newest video game system. This is a good time to teach them about priorities (e.g., food is more important than games) and delayed gratification. These lessons are helpful at all times—not just during an economic crunch.

Keep calm. When times are tough, you’re going to be stressed. This adds up, and when your child whines for the hundredth time that he or she wants to go out to eat, it’s easy to lose your cool. To fight this, learn stress-management techniques. If you don’t think that you can talk rationally to your child at a given moment, don’t try to. Instead, promise to discuss the issue later—and be sure to follow up.

Another option is to start a wish list for your children. When they ask for a special item, tell them that it is not an everyday purchase, and add it to the wish list. Explain that the list is for special occasions, such as birthdays or Christmas. Having the wish list will also help them to see how much they’re really asking for.

You can also try giving small presents. Young children, especially, are often satisfied by inexpensive items such as stickers, coloring books, and playing cards. Visit a dollar store to buy new toys.

If your children still have their hearts set on a big purchase, challenge them to brainstorm about ways in which they can raise the money themselves. Perhaps they can offer pet-sitting services to your neighbors or hold a yard sale.

Tough economic times actually provide wonderful opportunities to teach children about frugality, priorities, the great outdoors, selflessness, and much more. Let your children know that, when you have each other, you have all that you really need.

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