Kids and Finances: How Much is Too Much?

Kids and Finances: How Much is Too Much?

Kids can seem so fragile. I mean, they're just these little people, innocent and carefree. They can't possibly handle adult finance topics, right? Many people think that talking about losing your job or having to cut back hours at work would just be overwhelming to their little brains. But it's often not the case when presented well; kids can handle a lot more than you might think. Let's look at ways to handle the tough subjects with children of all ages.

Talking Shop with Young 'Uns

Although it may seem counterintuitive to talk to children under five about fledgling finances, it may actually be beneficial to them to know that there will be changes around the house. However, since they might not understand money at this point in their development, keeping your explanation simple and positive will go much farther than pulling out spreadsheets.

One way to break bad news to a child younger than five is to state your problem as simply as possible and offer a positive spin. You might wish to simply state, "Mommy lost her job, and we won't be able to go out to the movies anymore. But we can rent your favorite movie every Friday night and make homemade pizza!"

Discussing Bad News with Older Kids

Children ages six to ten may have a few more questions for you; a simple statement might not do the trick in helping to ease any concerns. The more that they already understand about money, the more likely a financial announcement could potentially upset your child. To counteract this, try to keep your statement about job loss as simple as possible and welcome questions. Also, a calm yet reassuring statement that everything will be alright may go a long way in easing their fears.

Your conversation could go like this: "I decided to cut back my hours at work so that I could stay home with you more often. This means less daycare for you (pause for cheers), but we might not be able to go out to dinner as often." Once you open the can of worms, staying calm and rational as you answer little questions can go a long way toward making them feel secure.

Breaking News to Tweens and Teens

As for tweens and teens: there really isn't a way to break news too simply. Children of these ages understand money basics, and they'll know that tightening the belt will most likely affect them negatively. Here, answering questions is key.

You might wish to break the news gently by saying, "I want to let you know there will have to be a few changes around here. I lost my job today, and we'll have to cut back." You can then lay out where you plan to cut back or you could ask if they have any questions – although questions may not pour in right away. There may be a lot of sulking and door slamming first. Here, it's important to remain cool and calm (take a few deep breaths if needed); teens can pick up on your anxieties and anger very easily, so staying Zen will help ease the transition.

Kids of all ages are able to adjust to bad financial news. As long as the conversation is tailored to their abilities, questions are answered and all parties remain calm, a financial setback can occur without upsetting the peace within your family.

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MoneyCone's picture

MoneyCone wrote:

Thu, 03/01/2012 - 15:43 Comment #: 1

When I shop at Target, I have to make sure my toddler son doesn't see the toys section! He simply refuses to budge from there!

Christa Palm's picture

Christa Palm wrote:

Thu, 03/01/2012 - 23:01 Comment #: 2

Doesn't that happen with kids at every age? Wait until the toys are $75 video games!

Alex | Perfecting Parenthood's picture

Alex | Perfecting Parenthood wrote:

Thu, 03/01/2012 - 23:18 Comment #: 3

@MoneyCone: I'm the opposite of not going to the toy section at target, we often go to toy or book or pet stores as outings! If we're shopping with the kids then a visit to one of these places really involves them. We rarely buy anything, and they know not to expect it, but we just explore and show each other the cool stuff we find.

@Christa: We always made sure our kids knew that things get bought with money. It wasn't too long before they stopped asking for things, because they were too expensive. Somehow we still have a house full of stuff, but we don't have too many of the huge expensive toys -- more like "Okay kids, we can get something for up to $4." and the kids go looking for toys or candy or books that's that right price.

Christa Palm's picture

Christa Palm wrote:

Mon, 03/05/2012 - 21:02 Comment #: 7

Alex, great approach for teaching them about your household cash!