How Much Should You Tell Your Children About Your Family’s Finances

This is a guest post brought to you by Charles Tran of Credit Donkey; A site dedicated to all things credit cards including detailed credit card comparisons, credit card reviews, and rewards program information.

Unfortunately this is a question more and more parents find themselves asking. But don’t let your dilemma of not knowing what or how much to say add to the stress. Following are several scenarios that will help you decide.

What should you tell a child that asks how much money your family has?

If this question comes from a child younger than 12, they are most likely asking out of the need for reassurance. So it’s important to give them that. They don’t care that their meals won’t be their favourite fast food-they just want to know that there will be food; and that you’ll all be together. As for older children, it won’t do to lie. Besides exhibiting behaviour you’ve taught them is wrong, teenagers aren’t dumb. They’ll be able to see right through your façade. In a calm matter-of-fact way, tell them that there are financial problems that are going to bring about changes in the family’s lifestyle. Giving your teens the opportunity to use the situation as a learning tool in money management can work to their benefit. You can also give them the right to make choices; music lessons or car insurance. Also encourage them to find a part time job to pay for the extras they want. Paying for these extras will cause them to appreciate things even more.

What if your high school senior has their heart set on going to a college you can’t afford?

This is the perfect opportunity to guide your teen through making one of the most important decisions of their life. You must be honest about your limits in being able to pay for their college education. They need to know their school of choice isn’t out of the question, but that in order for them to go there, they will have to really apply themselves when it comes to the ACT/SAT, and scholarship applications. Explain to them the ins and outs of financial aid (loans vs. grants), and how important it is for them to remember that the day will come to pay up. Show them you are committed to helping them achieve their dream, but also encourage them to look in to at least one or two other schools and compare the cost, degree programs, etc. before they make a final decision.

How should you tell your children the family is going to have to move?

It depends on the age of the child and why you are moving. Younger children will naturally be full of questions in regards to being able to keep their toys, their bed, clothes, and the family dog. Older children will ask fewer questions, but will have plenty to say in the way of objecting to leaving their friends, school, and other familiar (safe) zones. In answer to your younger children’s questions, assure them that leaving a place doesn’t change the fact that they are a family. And while it’s tempting (or maybe necessary) to purge a few things, make sure they leave with as many of their possessions in tow as possible. As for the family dog, we had to leave ours behind when we were transferred, due to having to live with extended family until we found a place to live. It wasn’t pleasant for any of us, but we had no choice. Sometimes things are just what they are. Dealing with the objections of your older children will be tougher. But once again, honesty is the best policy. Remind them that family always comes first, and that as their parent, you are making decisions that are best and/or necessary for the family as a whole.

What are some ways you can help children adjust to loss of income/lifestyle changes?

Smaller children, and a lot of older ones too, don’t understand the value of money. Help them visualize the necessary changes in a way they can understand. For instance, ask them if they want to see one movie this month, or be able to go skating or swimming 3 times. Ask them if they want to visit the ice cream store twice a month, or buy ice cream and toppings at the grocery store to enjoy all month long.

What do you say when your children ask you ‘why’?

What do you say when your children ask you ‘why’? You tell the truth - as much as is age appropriate, anyway. Another form of ‘why’ might be ‘why me’? Don’t be angry or punish a child for acting like … a child. They can’t help the fact that they still want things or that they don’t understand the workings of our country’s economy. Just be loving, but firm.

Often time children might also be inclined to think they are to blame for their parents’ financial problems; special needs, a large family, health crisis, etc. In cases like this, remind your children daily that they are loved and safe, and NOT the problem.

It’s also important to remember that financial discussions and arguments between you and your spouse should never take place in front of the kids or within hearing distance. You should never allow your children to see you crying over your financial problems, or hear you talk, argue, or plead with a bill collector or the bank.

Job loss, downsizing, relocation and/or changes in lifestyles are just a few things families are faced with during these difficult times. But telling your children about it doesn’t have to be … difficult, that is.

For more articles written by Charles and his team of finance writers, please check out the Credit Donkey Tips blog where you will find a lot more articles on credit, credit cards, and personal finance.