Many of us will need to talk to our children about our changed financial status in the next few weeks.
As the COVID 19 crisis devastates economies worldwide, many of us may lose jobs and suffer major losses in business. And this may force us to change the way we live and spend money.
In the past few weeks, many parents have been reaching out to me for consultations because they are tired of pretending that everything is alright. Pretending that they can afford things, even as they rapidly run out of funds.
It is not easy to tell a child that you cannot afford something that they have always been used to. But it is important to have this conversation because not having the conversation can have serious consequences.
Pretending that you can afford things that you cannot, can make your financial status worse. And the stress you feel because of keeping this huge secret can create distance between you and your child.
In this article – I am sharing some tips on how you can talk about your financial status with your child.
Things To Keep In Mind When You Talk To Your Child About Your Financial Status
#1. Do Not Underestimate Your Child’s Ability To Understand
Most children are likely to know about your financial problems even if you have not told them.
When we do not tell them clearly what the situation is – they imagine what is wrong. Their imagination may prompt them to imagine something that is much worse than what exists.
#2. Be Brave And Positive When You Begin Talking
Children learn about what to fear and what to welcome based on our response to the situation. It is our attitude towards adversity more than the adversity itself that tells them how to react to loss.
#3. Have An Action Plan
Knowing what you can do to take action to prevent disaster reduces stress.
Instead of just telling your child what you cannot afford now, show them what you plan to do to overcome this challenge. Explain how you will work as a team.
#4. Focus On Empowering Instead Of Protecting
We want to protect children from our financial problems, but in reality, we must empower them.
Focus on helping your child understand financial management so that instead of being afraid of losing money, they learn to protect their money.
#5. Keep Everything You Say Age-Appropriate
You can have the whole conversation mentioned below with your teenager in one sitting. For a toddler, you may have to leave out many parts of the conversation and explain in a way that your child understands.
Keep your child’s maturity in mind when you speak. Some teens may be quite immature whereas many much younger children may be very mature.
#6. Do Not Use Your Child As Your Confidant
Share facts about your financial problems. Facts like the new budget that needs to be followed and so on.
However, do not begin to share your worries with your child. Your child – even a teenager – is not mentally or emotionally ready to share your worries. You must share your worries with someone your own age.
10 Steps To Talk To Your Child About Your Financial Problems
Step #1 – Start With Gratitude
You can begin with helping your child to understand how the Coronavirus pandemic is affecting the health and lives of people across the world.
Explain to your child how people in different countries have lost their lives to this pandemic.
Talk gratefully about how lucky you and your family are to be healthy – well and together through this tough time
Step #2 – Talk About How Health Is Much More Important Than Wealth
Talk about why countries have locked down to ensure that fewer people get the infection. Explain how this has led to the whole world becoming poorer because people have not been able to go to work
Then add how right this move has been because life must always be valued more than wealth.
Step #3 – Explain How The Prevailing Circumstances Have Affected Your Family
You need to slowly explain why you have lost your job or why your pay has been cut. Ensure that your child does not begin to feel like a victim through this conversation.
You must explain to your child that no one is out to get you. No one wants to purposely harm you. That these are unforeseen circumstances, and everyone is suffering in one way or the other.
Also, emphasize what job loss means to the poorer sections of society who may not even be able to eat their next meal when they don’t have a job.
Show your child that there are people who have lost the earning members of their families to COVID 19 and how much worse their plight is than yours.
Step #4 – State That You Are Not Afraid
You should talk about how setbacks are opportunities in disguise.
Categorically state that you are not afraid and that you know that you can overcome this challenge just like you have overcome many more in the past.
Give some examples of a time when you may not have been as well off – and how those times were fun too – but in a different way.
Talk about how hard work and not luck – brought you to where you stand today. Tell them how you are confident of working hard-working enough to go back to where you were.
Step #5 – Talk About Your Plan
Tell your child what you are doing and have done already to come out of your financial problems.
Talk about what you plan to do to get another job or pivot your business in the coming days.
Remember to speak in an optimistic tone of voice. Let your child know that although the scene looks bleak it is important to look out for opportunities because opportunities arrive when there are adversities.
Step #6 – Share Your Plan For The Family
Before you begin – have a list of things that you spend on currently and divide them into needs and wants in two columns.
Also, divide the wants column into three parts
- First column one for things you will cater for in your new budget
- Second column for things you will temporarily discontinue
- Third column for things you will have to permanently discontinue
Then speak to your child and ask their opinion on your classification. Exchange things in the columns if they want them and if they can be accommodated.
Be fair to every member of the family by the time you finish the list.
Step #7 – Talk About How Each Of You Can Contribute In Small Ways Towards Saving Money
You can give your child a list of things that they can do. For example, switching off extra lights whenever they see them on. Remembering to carry a water bottle so that you don’t have to buy water when you are outside and so on.
Stress on how maintaining things and keeping them in good repair can save money.
If your child is old enough ask them to make shopping lists and look out for discounts so that you can save money.
If you have a teenager you can ask them to help out with some small tasks that you need to do to find a job or pivot your business.
Step #8 – Talk About Good Financial Practices
Always remember that this is a learning opportunity for your child. Focus on sharing knowledge and practices that will empower your child.
You can help your child understand
- Why it is a mistake to buy on credit
- Why it is important to pay loans off on time
- How every paisa saved is a paisa earned
Read up with your child on how to make a budget that allows us to have everything we want even when we have extremely limited funds
Be excited about learning more, so that your child is excited about learning too. As soon as we find something new and exciting that we can do – even the most difficult journey becomes exciting.
Step #9 – Talk About Contributing
Tell them that as little as we may have – we still have more than many others. You should focus on that and get your child to focus on that too.
When you make your budget – set aside a small amount to donate to someone in need and let your child know about it.
As soon as we start thinking about those who are less fortunate than us we are compelled to count our blessings. That makes us feel good too.
Show your child that we can contribute in kind with our bodily strength, our skills and our knowledge to help those who are less fortunate. That we must continue to do that no matter what our own challenges are at any given point.
Step #10 – Be Prepared For A Few Episodes Of Tantrums And Disappointments
Don’t expect the conversation to be a one-time conversation and that your child will understand and remember everything that you have said forever. Don’t expect your child to do what has been decided without faltering.
Remember that you are dealing with a child who does not have the self-control you expect.
Expect your child to sulk and throw a tantrum when they don’t get what they want but don’t lose your temper when your child throws a tantrum.
Also, don’t give in to the tantrum and buy what your child wants.
Talk to your child. First, listen to them and then explain why you are saying no. Most of the time when children are asking for things – what they want is a connection with the parents.
Spend time with your child and that will reduce the tantrums for things.
How To Educate Your Child About Money Habits
#1. Show Your Child How To Handle Money
The easiest way to teach a child about handling money is to give them some money. Give your children physical money in the form of notes and coins and not plastic money in the form of cards.
The physical money gets over and that helps children to understand its value, unlike plastic money.
Encourage your child to keep their money in 3 jars.
Name the jars
- Jar for spend money
- Jar to save money
- Jar to give money
Help your child to split up any money that they get into these 3 jars in a certain proportion.
Keeping money like this – helps children to understand that one needs to think about the future and about others all the time.
#2. Teach Your Child How To Shop
When your child wants to buy something try and make them pay for it from the money they have. This helps your child to understand that everything costs money and that money gets over when it is spent carelessly.
Explain that when we buy something, we must buy things that add value to our lives. A good way to teach this is to discourage children from buying junk food.
Show them how companies that manufacture junk food are making us spend money to buy things that destroy our health.
Teach them how healthy food is valuable – and also costs much less. How we must choose to buy something that is truly valuable rather than something that looks good but makes us poor and unhealthy at the same time.
Whenever you go out – shop with a list. Exercise self-control so that your child can learn how impulse shopping wastes money while planned shopping can help us meet all our needs and save.
Help your child to understand how supermarkets and companies make us spend more money than we need to.
Explain how expensive products are always placed in front of us in supermarkets and how colorful packaging makes products more expensive.
Help your child to compare prices when they want to buy something. Encourage them to stick to their budget when they go shopping.
Encourage children to match the items ordered with things bought whenever you buy something.
#3. Talk About Ads While Watching TV
Analyze and explain how ads are structured and placed to prompt us to buy and how they often make us buy what we may not need.
Explain how ads convince us that we need a certain product to feel happy. And show them how that is not true and how much fun we can have without spending money.
#4. Encourage Children To Save For What They Want To Buy
All of us love our children very much and we want to make them happy.
But we must remember that saving up and buying something increases the pleasure of buying the thing tenfold. So, we must allow children to experience happiness.
Even if you want to buy them something, ask them to put expensive things on the birthday list. Do not buy them on impulse.
#5. Talk To Children About Mobile Phones And What They Cost
All of us like the newest and latest gadgets. However, we must talk to children about how many of the new features are useful to us in day to day life.
Discuss the mobile bills and how to choose the best plans and reduce expenses by using Wi-Fi instead of Data.
Also, discuss how “Time is Money” and how we must not waste time on devices if we want to be rich.
Financial problems can cause a lot of stress and send us into a panic.
But if we calm down, we can use the lack of money to learn what truly matters in life. And to teach our children about that as well.
We can also use this time when you have to share your financial problems as an opportunity to improve communication in the family
Always remember ….Tough times don’t last. Tough people do.