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Teaching Kids About Money – Should You Be Honest About A Difficult Financial Situation?

By Casey Slide

teaching kids about moneyMany families are being hit hard by the recent economic recession, and will likely celebrate Christmas a little less extravagantly than usual as a result. This might mean making cheap homemade Christmas decorations and ornaments or buying dollar store items, using more frugal Christmas holiday gift ideas, and starting Christmas shopping early to save money and reduce holiday stress.

You may be able to relate. Perhaps your kids are expecting the normal mounds of presents on Christmas day, but this year, it’s just not in the budget.

So what are you to do? Certainly you can’t disappoint the kids, but at the same time you can’t afford to live beyond your means either.

One answer to this predicament is to simply be honest about your financial state with your kids. Below are 8 key reasons why this may be a good option in order to teach your kids about money.

8 Reasons to Be Honest with Your Kids About Finances

1. Be A Good Role Model
If you’re like me, you always want to be a good role model for your kids in all aspects of life. However, we often struggle as a nation to show our children how to respect and handle money in a proper way. If you’re struggling financially, you can be a good role model to your kids by showing them that you refuse to live beyond your means even when it’s holiday time. Buying gifts is not a good reason to use credit cards and pile on consumer debt, and teaching kids not to borrow money whenever possible is an important lesson. Demonstrate to your kids how you handle and budget your money responsibly. This could be a priceless learning opportunity for them that leaves a lasting impression even into their adult lives.

2. Avoid Overspending
If you are honest with your kids and tell them upfront that they will not be receiving as many gifts this year, it should help avoid overspending and minimize some of the disappointment. It is hard not to buy your kids lots of gifts, but if you discuss the situation with them, and they know what to expect, it’ll be much easier for you to stick with your budget and prevent any overspending. This might also be a good time to teach your kids to save by creating a piggy bank or by using an online family allowance management tool like ThreeJars. That way, they can still earn some of the toys and items that they were hoping to get for Christmas by saving up on their own.

3. Teach Honesty
The best way to teach your kids virtues is by being virtuous yourself. As the saying goes, you must practice what you preach. In order to be honest, you not only need to tell the truth, but you also cannot withhold the truth. This of course includes information concerning your difficult finances. You may think that it’s better to keep your kids in the dark with some issues (and there are some instances where this is true), but finances have a large impact on your kids’ everyday lives and they should understand what’s going on.

4. Bring The Family Closer Together
Life isn’t always easy, but it’s more manageable when you focus on the good in a situation. One of the positive things about any difficult situation is that it brings people closer together. So why not use bad for good by building stronger bonds in your family during the holiday season!

5. Get The Kids’ Help
Kids are very smart. They question everything and think outside the box. I’m not saying that you should rely on your kids to come up with ways to get you out of a sticky situation. What I am saying is that it’s okay to ask your kids what they think they can do differently to help the family. Although parents are ultimately responsible, this is a great way to teach kids responsibility as they jump in to contribute.

6. Show Your Kids The Real World
In the real world, money does not grow on trees, and sometimes, money is tight. By being honest with your kids, you have a springboard to talk to them about being realistic in regards to money. Many families go through hard financial times, and it is nothing to be ashamed of. Help your kids realize that they can’t always get what they want and that there are more important meanings of holidays than just gifts. That’s great financial advice you can give as a parent.

7. Help Them To Avoid Making the Same Mistakes
If you are in a difficult financial situation because of no fault of your own, this doesn’t apply to you. However, if you made some poor decisions, let’s say in regards to credit, then this is a perfect time to teach your kids about about your mistakes and how they can avoid the same traps. They will see the consequences of poor decisions and irresponsible spending first hand and be much better off because of it.

8. Be Optimistic
Show your kids that despite challenging times, you are still hopeful and optimistic about a wonderful Christmas and a fruitful new year. Be an example of how to take a tough situation into your own hands. And if you are a religious family, demonstrate to your kids that you still have faith despite the fact that you are perhaps not being blessed financially.

Should You Be Honest With Your Kids About Having Lots of Money?

Consider now the flip side. What about families that have lots of money? Should they also be honest with their kids about their financial situation? Absolutely! Show your kids that having money doesn’t mean you can go on an all-out shopping spree. You still need to be responsible with your money even if there seems to be a large supply now.

How to be Honest With Your Kids About Money

It can be difficult to discuss a stressful topic like money with your children. Here are a few tips to make it a little easier:

  • Reassure your kids that everything will be okay. Don’t just say that you don’t have any money and leave it at that. Instead, tell them what you do have money for and explain what types of changes are needed in lifestyle. Focus on the positives and ask them to contribute ideas on how to save or earn money for the family.
  • Keep an open dialogue going concerning finances. Ask if your kids have any questions and concerns. Continue to teach them along the way and involve them as much as possible as you try to improve the family situation.
  • Make sure your kids know how much you love them. Spend some extra time with them. Perhaps get rid of the cable and have a family game night. There are actually quite a few activities for kids that don’t require any money. Quality time with parents is very important to kids, often more so than physical gifts (isn’t this a common theme with a lot of holiday movies?).

Have you ever been put in a difficult position where you needed to be honest with your kids about your financial situation? If so, what is your story? Share your experiences in the comments below!

(photo credit: Shutterstock)

Casey Slide
Casey Slide lives with her husband and baby in Atlanta, GA. She graduated from the University of Florida in 2005 with a bachelor’s degree in Industrial Engineering and worked for a prominent hospital in Atlanta. With the birth of Casey’s son in February 2010, she decided to become a stay-at-home mom. Casey’s interests include reading, running, living green, and saving money.

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Comments

  • http://frugalbohemian.blogspot.com Olivia

    You’re right on with your comments. Our parents never spoke to us about their struggles and so we were unprepared when we went on our own.

    We have been talking to our kids. They are old enough to participate actively. We really started feeling the pinch about six years ago and finally brought them completely into the loop last year. If it were a matter of a tweek here and there (ie Christmas gifts and cable-which we never had anyway) that would be one thing, but it’s been across the board on essentials.

    As a result they’ve been better about making what they have last, and have asked for less of what they need. They are learning important life lessons. We are teaching them our frugal hacks. Still, it would be unrealistic to tell them everything will get better. They’ve felt free to make suggestions, but once I explain how things work (I may have already tried what they thought of), they feel some of the boxing in. There are no simple solutions. It’s a matter of perseverance and taking opportuities as they come up. They are learning patience and living within their means.

    We’ve always had food and clothes and a place to live. We’ve had hefty medical issues this year but haven’t had to go into debt to cover them. This year we’ve been given some wonderful gifts as well. My sister used to call them as “butterflies on the sidewalk”. A splash of color on a gray backround. A moving sale couple gave us a beautiful Christmas tree this summer when they found some of the lights didn’t work. And when we put it up last week found out they were wrong. My (former art teacher) uncle gave us a quilt top he had made years ago that “just happens” to go with our differently colored bedroom walls. I won two gift cards through contests. So there have been some nifty personalized encouragements from God. Our “daily bread” plus some. The kids see that as well.

    • Casey Slide

      Olivia – Thanks so much for your story. That is awesome how much your kids have learned from you, and how much God has blessed you. This is a great example that involving your kids in your finances is beneficial for the whole family.

    • jl

      Sometimes, unfiortunately, you don’t have a choice and you have to include the kids in what is happening financially. It directly affects them and they know something isn’t right. While we have tried to always give them what we could-within our means, we can no longer do this and recently had to get rid of a dirtbike-which our son has taken very hard. It was a tuff decision and we did it while he was gone or there would have been more hurt. We told him right away, and he knows we have been struggling, but the disappointment is so hard to take-as a parent, you just want to make everything better. While we still have our house and cars, I do feel very fortunate. There are times the cupboard is very bare, but we make do. I keep a positive attitude and feel things will turn around (and have been saying this for last several years). I am hopeful it will be soon, as not sure how much more I can take. Our marriage is rocky at best and the tension is so thick you can cut it with a knife. The financial stress is weighing heavy on all of us. And look at congress-can’t make a deal until it hurts who-us the little people. Tax who-us the little people. The schools raise taxes-don’t want to cut spending, but really, for those of us who cannot afford an increase, it is devastating. We have to live within our means, of which are really slim, why doesn’t the local state and federal government have too? We should be taking care of people living in the USA first, instead of all over the globe. Bitter, yes, I guess I am as we struggle just to make it to the next day. So many of us have to share the experience of disappointment with ourselves and with our children even when doing your best isn’t good enough anymore. I know this is kinda a depressing post, but having just went through this today, the hurt, disappointment and failure are fresh fresh fresh. Tomorrow will be a new day and holds in it promise. Thank you for listening, I understand we don’t have it as bad as some, but the situation doesn’t make it any easier. I was looking for a chat on when things get tuff how to handle with your children.

  • http://www.debt-tips.com/blog KDB

    Yes – but only to the extent that it teaches a lesson. Otherwise, your kids don’t need to know the details of your struggles, just the lessons to be learned from them – being frugal, saving, keeping a positive spirit.

    • Casey Slide

      Yes, very true. There are some details of your life that your kids do not need to know about. And there is also no reason to scare your kids!

  • http://www.credit-card-debt-relief-info.org Shan | Money Management Tips

    Yes, couldn’t agree more. Kids hardly learn by us telling them what to do, but more so by observing us, and getting a feel of what they think we do. It’s much easier to tell kids to do something, if we ourselves do it right in front of them. Just think back to how we were when we were kids, that’s pretty much what we used to do.. watch parents and those around us. Same formula when teaching them about finances as well.. and it certainly helps when we are as honest with them as we can (keeping their age in mind, of course).

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