Job loss, relationship breakup, illness, or simply struggling to live paycheque to paycheque — there are plenty of reasons why families experience financial struggles at some point. While parents are acutely aware of the challenges they may face, how do you talk to kids about money struggles?
Opening up and talking about money with your kids may feel uncomfortable, even daunting to some parents. This isn’t surprising given that more than half of Canadian parents feel their parents weren’t proactive in teaching them about money and budgeting, according to a 2022 Mydoh survey.
November is Financial Literacy Month and the theme for 2024 is “Money on your Mind. Talk about it!” Research shows that talking about money builds financial confidence, and can lead to better financial outcomes. With this year’s theme in mind, we spoke to Natasha Knox at Alaphia Financial Wellness on how to talk to kids about financial struggles.
Start with how you feel
Knox suggests that before parents even begin talking to kids about financial issues, they should shed light on their own feelings first. “The biggest obstacle for parents talking to kids about money is their own fears,” she explains. “Usually those fears are based on some reality like different traumatic things that happened around money growing up.”
Before calling a family meeting, consider whether you’re feeling scared, frozen, or reactive about your financial situation. Knox says once you’ve acknowledged how you feel, have compassion and empathy for yourself. “Start there, that’s step one.”
Provide reassurance
It’s understandable that parents may want to avoid talking about financial stress. However, as Knox explains, “Your kids are experiencing it whether you talk to them or not.”
When talking to your kids or teens, the main goal is to help them feel safe. “If there’s nothing else, kids need to be reassured they’re going to be okay,” says Knox. “And what okay looks like might not be the status quo.”
Let them know that they may see some changes in your family’s finances and encourage your kids to ask questions. While it’s important to talk honestly about your financial situation, Knox suggests you avoid oversharing details that may make your kids feel scared or that their basic needs won’t be met.
Have a plan
To help kids and teens feel safe and reassured, come up with a plan ahead of time, one that couples are in agreement on. “You don’t need to give kids granular details of what’s going to happen,” says Knox. “But allow them to understand that there’s a system in place and you’re working on it.”
Acknowledge there may be change
When you’re faced with financial stress or uncertainty, chances are some things are going to have to change. Whether you’ll need to cut down on take out or sell your car, be honest and open about the sort of changes your family may have to make. Knox suggests parents tell children that yes, we are going to have to make certain changes, but it’s not necessarily forever.
One way parents can frame how things change is to position them as different choices. “You might say, ‘We’re going to have to wait on some things like taking a vacation or a new pair of sneakers,’” Knox explains. Help kids understand that was before and you may be able to afford them again but, “That’s just not on the menu right now.”
Make the conversation age-appropriate
How you talk to an eight-year-old will be different to how to talk to a teen about financial struggles. With younger kids, parents can talk about wants and needs, explaining that your family is going to have to prioritize needs, like housing and food, over wants like a new game or eating out at this time. Keep conversations simple.
Teens are more likely to understand your current financial situation. However, like younger children, avoid oversharing or providing too many details that might worry them. Reassure them you are in charge.
Involve kids in finding solutions
There are some decisions that parents will need to make, involving kids in helping to find solutions can help give them a sense of control. Knox says that when it comes to cutting back, everything can’t be as important as everything else. “When it comes to your kids, consider asking, ‘Why is this important to you?’” she adds. Give them the opportunity to problem solve how to afford those items. “It might be scouring Marketplace to find a used version,” says Knox.
Be aware of what you model
Another thing parents should consider is what you model to your kids, because they’re watching us carefully. “Often parents want their kids to know something about money but they’re doing the absolute opposite,” says Knox. If you’ve decided as a family to cut out certain items, like new clothes, then be sure you’re willing to do the same.
Navigating financial struggles as a family is an opportunity to model taking responsibility when it comes to money. “There are many ways parents can increase their financial literacy and there’s a tremendous power in our children being aware that we’re levelling up our own skills,” says Knox.
The advantage of talking to your kids about money
The advantages of talking to your kids about money is simple: “They learn about money. They learn how it works. They learn where it comes from. They learn it’s to be managed first and spent second,” says Knox.
“So that visibility is building skills for them and they can learn money is not scary, it is a tool and this is how you use that tool.” Remember to keep the conversation going to help your kids learn that talking about money doesn’t have to be something to fear.
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This article offers general information only and is not intended as legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. While the information presented is believed to be factual and current, its accuracy is not guaranteed and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author(s) as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or its affiliates.
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