Use Recession to Teach Kids Sensible Spending

Filed under: Expert Advice: Toddlers & Preschoolers, Expert Advice: Big Kids, Expert Advice: Tweens, Expert Advice: Teens

Don't let a recession go to waste, it's a teachable moment.

Are you promoting good money habits? Credit: Guru family, Flickr


Just like corporations are using the recession to restructure, you can use it to teach kids that money doesn't grow on trees.

Most forecasts say the economy will limp along this year, so trimming the family budget is a popular resolution. Many families are being forced back to basics by the economy, which makes this a good moment to start teaching kids about saving for the future and living within your means.

A recent story in the Dallas Morning News was full of examples of parents struggling to explain to their kids why they were cutting back on restaurant meals, day care and Christmas toys. As one single dad put it: "A lot of things are things you realize you can do without."

People's "money scripts" -- the way they think about money -- often form in childhood, Rick Kahler, financial planner of Kahler Financial Group in Rapid City, S.D., tells ParentDish in an e-mail.

"During tough economic times, children can develop fearful money scripts that may keep them from managing money successfully as adults," he warns.

So, begin by getting a grip on your own financial panic before your kids notice it. Kids can tell when Mom and Dad are anxious and fighting about money; hiding it only makes things worse.

Talk to an accountant or financial adviser and get a good idea of what your family owns, owes and needs before you talk to your kids. Be calm.

Don't be embarrassed if your own financial situation isn't what you'd like it to be; your efforts to fix it can be a lesson for your kids, says Justin Sinnott, vice president and financial consultant of Charles Schwab & Co. What's important is to set a good example of financial responsibility -- don't tell them to do as you say, not as you do, he tells ParentDish in a phone interview.

"Maybe that's the hard conversation: 'Let me take a look at myself,'" says Sinnott.

Once you've gotten a grip on things, sit the kids down, explain that times are tough and reassure them you're taking care of things.

"If you don't panic, they won't either," Kahler says.

If you have a serious crisis at hand, such a job loss, it's OK to ask older kids to pitch in by giving up luxuries or contributing some of their earnings from part-time jobs for expenses, Kahler says. But make your own sacrifices first, and make sure they know you have done so, he warns.

"It's easier for kids to give up ballet lessons if you've already canceled your spa membership and cut out your morning visit to the coffee shop," he says.

The single dad interviewed by the Dallas Morning News cut his 14-year-old daughter's allowance from $50 a week to $20 after he was laid off a year ago.

You have to strike a balance between being overprotective and overly demanding, Kahler says.

"The key is to talk honestly about the situation and reassure kids that, as a family, you can get through this tough period," he says. "Let them know you value their help, and teach them by example that being resilient and working together can be empowering."

Related: Teen Girls No Longer Recession-Proof

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Start by teaching him that it is safe to do so.