Kids and Finances: How to Tell Them You Must Cut Back

If there's one thing that's difficult for a child to understand, it's a change in finances. Often, their entire short lives have centered around one way of living, so switching gears can seem unfair, especially when the alteration means cutting back on some of the things they have learned to expect in life. So how can you as a parent explain to them why Chuck E Cheese is out of the question when life throws you for a financial loop? Let's look at some options.

Explain Money

Before you can go too far in explaining the Chuck E Cheese equation, kids need to understand where money comes from. If you haven't already explained that you and your spouse go to work to bring in the cash, it's time to have this discussion. As simply as possible, let your child know the basics about making money, paying bills and budgeting.

You could introduce the topics briefly and to the point in the following way: "Mommy has to go to work to make money. Once I get the money, I have to pay for bills like water, electricity and groceries. Whatever's left in the money can be spent on fun things, like eating out at McDonald's."

For many children, this discussion could be extremely boring. But even if their attention falters before you get too far (and that bouncy ball becomes more appealing than talking to you), your child most likely took in the gist of your information. Depending on their age, you may get inundated with questions. Or you could get a shrug. Either way, kids pick up on information quickly, and you've set the basis before you know it.

Explain Change

Once you've set the groundwork, it's time for the big discussion. You may want to sit your child down for a focused conversation at this point, or you may wish to downplay the information by holding your discussion during play. Whatever your choice, picking up where you left off can help ease you into the topic.

For example, you could say, "Remember when Mommy talked about how money comes from my job? Well, I had a change to my job, and they no longer need me to work as many hours. This means I'll be home more. But it also means that we won't have as much money to spend on going out to eat."

Your child may not understand immediately, so expect a few (hundred) questions, either immediately after the conversation or a few days later. When the questions do pour in, it's important to remain cool, calm and collected as you answer them. Kids can associate annoyance with finances quickly, and that could leave them even more disappointed in cutting back. To offset a natural disappointment, you might want to find some low-cost alternatives to the former fun, like a homemade pizza and movie night.

Overall, kids are resilient. Even if you expect them to throw a fit at cutting out some fun things in life, if you present it well, they may come to terms with the changes faster than you ever expected. Fitting in some low-cost fun activities may help them transition, and before you know it, you'll have children who are well-adjusted to the financial difficulties.

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Anonymous's picture

Niki wrote:

Wed, 03/14/2012 - 12:29 Comment #: 1

Great topic. We had to go through this when we were debt busting last year. We are very open with our kids about our spending and how much value we place on a dollar. I hope they grow up knowing more about personal finance than I did. At least the saving part.

Anonymous's picture

Jana wrote:

Wed, 03/14/2012 - 12:58 Comment #: 2

My 5 year old HATES that I work, even though I've been working her whole life. However, I explain to her that I need to go to work so we can live in a house and have food and clothes and books and toys, and that seems to satisfy her. When talking to kids about money, it's important that you explain it on their level; you're going to explain things to a 7 year old way different than a 3 year old.

Christa Palm's picture

Christa Palm wrote:

Wed, 03/14/2012 - 17:41 Comment #: 3

Niki, I love your approach of being open and honest. I'm sure your kids will grow up with a lot of financial know-how!

Jana, great approach in explaining work and money! And very true about presenting things on their age level.

Anonymous's picture

MoneyCone wrote:

Wed, 03/14/2012 - 20:56 Comment #: 4

And if your kid is too young to understand, go to great lengths to avoid taking them through the toys section when shopping at Target! That's what we do! :)

Christa Palm's picture

Christa Palm wrote:

Wed, 03/14/2012 - 21:46 Comment #: 5

MoneyCone, you could just tell them that the toy section was demolished :-) Just kidding -- I can already see the tears that would induce!

Anonymous's picture

Julie @ Freedom 48 wrote:

Fri, 03/23/2012 - 00:00 Comment #: 6

That's a great way to put it! I think we have to make an effort to connect the dots for our children - to show them cause and effect. More work = more money. Buying things = less money. It's great to start early though =)

Christa Palm's picture

Christa Palm wrote:

Thu, 03/29/2012 - 16:04 Comment #: 7

Welcome, Julie! Great point about making the extra effort with kids!

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