Honesty is the best policy. It’s one of the most important lessons virtually every family tries to instill in their children.
But is honesty still the best policy when it comes to family finances and money problems?
Families who are facing money problems should still be upfront with their children about money.
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Depending on the children’s ages, the conversations and teachings about money will look a little different, but they still need to take place for everyone’s sake.
Say Enough About Money Troubles, but not too Much
Trying to keep secrets from children sets everyone up for failure or frustration. Not only can children sense stress, but they may also misunderstand the source of any anxiety, anger, or secrecy they pick up on.
They may blame themselves or allow it to cast confusion on their day-to-day lives.
Instead of being secretive about financial troubles, let children know there are financial issues in clear and honest terms. Try to avoid placing blame, becoming overly emotional, or giving off a sense of hopelessness during these conversations.
Focus not just on the problem itself. But also on the fact that there are possible solutions the family can work toward as a team.
Even from a young age, it is important that families remember to talk openly with children.
Experts recommend carving out time to talk and listen to young children, advocating that families discuss not just good news, but also talk about different situations and emotions, including stress, anger, fear, and embarrassment.
During conversations about money issues, families should be brief and keep things simple.
Let young children know the family is focusing on essential things like housing and food. Instead of keeping up with new toys and clothes. This will help them start to understand priorities and delayed gratification.
Sometimes, however, spur-of-the-moment situations arise. A trip to the grocery store or even the gas station could prompt a request for a new toy or treat. The same might be true after a child returns from a playdate or a sleepover.
Telling a child no is perfectly reasonable. Then, follow up with a more detailed conversation at a later time.
Talk with them about creating a wishlist for holidays or even consider setting up a system where children can earn small rewards for good behavior or helping out around the house.
With children of any age, modeling is powerful. This is especially true for preteens.
If a preteen has her heart set on a brand-new back-to-school wardrobe or gaming console, families can help them understand not every want is fulfilled immediately in life.
Instead, have a conversation with the preteen about how much spending money is available to the family each month.
Preteens have the mathematical skills and common sense to appreciate the general concept of a basic 50/20/30 budget, with emphasis on the fact that extra money could and should go toward debt and other family members, not just the preteen’s wants.
Adult family members can give examples of how they, too, are having to cut back or postpone purchases. Just like with young children, it is useful to help a preteen set up wish lists or work around the house for the things they want.
Preteens are also often responsible enough to take on small neighborhood jobs like watering neighbors' plants, taking in their mail, or even pet sitting while they are on vacation.
They might also offer to rake leaves, shovel snow, or be a mother’s helper. Putting in this kind of work will help preteens determine if they have a worthwhile want or just a passing impulse.
Teens are savvy enough to understand more about global, local, and household economies.
Not only have teens likely studied topics like the Great Depression and possibly even the more recent recessions, but teens are also exposed to financial information on the television and through social media.
As a result, teens should have a clear understanding of the importance of money and the impact the economy may be having on their community or even their household.
Additionally, talking openly about money problems helps teens understand how smart financial decisions now can set them up for success later.
For instance, their friends may take things like cars for their sixteenth birthday for granted. However, there is real value in helping teens develop financial literacy now and a good work ethic.
With $1.2 trillion of auto loan debt shouldered by Americans, 6.3 million people are more than 90 days behind on their payments. Certainly, learning how big loans work and the benefit of paying for a car outright through hard work and planning is a lifelong lesson more people could use.
Focus on Financial Solutions
After families have talked about financial struggles with their children, it is vital to focus on solutions. Treating everyone in the family like team members is a helpful way for children to understand how everyone can make a difference. Some things to try include:
Develop a financial mission statement. A financial mission statement can help the family visualize your financial goals and remind everyone why you’re looking to accomplish them. It describes what the family wants to attain financially based on household values and how you all will help produce the desired results.
Create a budget. Establishing a family budget is important. Even if families choose to not share all the nitty-gritty money details with their children, it is essential that children understand the concept of living within their means.
Set goals together. Children of all ages can and should set goals. Adult family members can model this by not just wishing aloud for things, but connecting wants to savings goals.
For instance, maybe some families will set up a vacation fund, while others might start saving for a new car or saving for college. That way, children can begin to see that wishing for things or experiences is not nearly as powerful as saving for them.
Find new hobbies. In today’s culture and society, it is easy to feel obligated to shop and spend. However, there are plenty of free or inexpensive ways to have fun as a family. Or allow children to pass the time on their own. Explore the outdoors through picnics and hikes.
Use local libraries to check out books, DVDs, video games, and even museum and zoo passes. Opt to participate in sports through local park districts or recreation centers instead of expensive private clubs or traveling teams. Look into gardening, journaling, drawing, cooking, or baking.
As a family, determine passions and interests and consider the ways these hobbies can be fostered with minimal expense.
Final Thoughts on Sharing Money Secrets with Kids
The American Psychological Association found 62% of adults surveyed indicate they are stressed about money. While it is easy to feel your family is the only family to experience money problems or stress, that is not the case.
Talk openly and honestly about money in a solution-oriented manner with your children. No matter their age it can have lasting benefits for the whole family.
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Smart Money Smart Kids: Raising the Next Generation to Win with Money – by Dave Ramsey and Rachel Cruze
How to Talk So Kids Will Listen & Listen So Kids Will Talk – by Adele Faber and Elaine Mazlish
Vicki and Amy are authors of Estate Planning 101 – a Crash Course in Planning for the Unexpected -coming soon from Adams Media.