The News and You: How to Talk to Your Kids About Money

The darkening economic picture and the wild swings in the stock market have made many in Scarsdale worry (again) about their own financial futures. It’s true that money can’t buy happiness—we all know people who have huge bank accounts and are miserable—but it does help pay for a lot of fun things like vacations, dinners at restaurants, new clothes, new gadgets and so on. Despite your best intentions, your kids may have already started to equate the two. More likely, the kids assume these fun things are just part of life. But that may not always be the case. Anxiety over jobs, savings and the future is palpable in Scarsdale as it is everywhere. The current economy may force you to cut back, or you may want to change your spending ways before something dire happens. You and your spouse may be on the same page about changing your family’s spending habits, but getting this across to your kids without scaring them or upsetting them isn’t the easiest of tasks. It’s do-able and it may even teach them a thing or two.

Kathleen Piaggesi, a Certified Financial Planner based in Scarsdale, offers these tips for talking to your kids about money:

The Money Out of the ATM is Not Infinite: A lot of kids, especially younger ones may see you run to the bank and a wad of $20s suddenly appears. They may think there’s just a magic endless supply. In fact when my son was about six he once suggested we install an ATM machine in our foyer to spit out an endless supply of bills. Explain your expenses to your children – and tailor the conversation to be appropriate for their age. There is no need to get into the details of how much you earn and what your mortgage or car payments cost you each month; but you can list your expenses and say you only make a certain amount and you all must work within that framework.

You may want to consider limiting trips to the bank to once a week and taking out what you think you’ll need in cash. It may feel retro but it could increase your awareness of what you spend for you and your kids and give you ideas about how you can cut back.

Tie Allowance to Chores and No Longer Be Bank of Dad or Mom: Again, totally retro, but our parents may have had a point. Make the kids work for what they earn, even if it’s just straightening their rooms or clearing the dinner table. They may even like the sense of responsibility this gives them. Of course you won’t let your kid starve or be without a few dollars in their pocket if they go somewhere, but try and be firm on this one. It may seem like common sense and people reading this may sniff that this is why kids today are spoiled brats, but a lot of parents work hard to give their kids the best life possible and that often means giving them money whenever they need it. Remind yourself that giving them responsibility and setting limits is part of being a good parent.

If You Have to Cut Back- Do It Together: Kids will see the hypocrisy immediately if they are forced to cut back on things and you are still doing all the things you’ve always done. Cut back as well. You may not be the most flagrant of spenders in your home, but demonstrate that this is a group effort. Piaggesi adds that your children may also feel singled out or punished if they are asked to change their ways and you do not. Piaggesi says that if you approach cutting back or saving as doing something as a family the kids may be more receptive.

Keep Calm and Make a Game Plan: These are difficult times and you may have lost your job -- or are living on less due to the loss of a bonus or investment income. It can be scary and overwhelming. If you have older kids, they may remember what it was like in 2008 and understand what is going on now. They may be very nervous about their future, college or their overall sense of security and be too upset to talk about it. Make your family a team. Talk about a plan but try and do it in a broader context. Explain that not going on a vacation this year, or not doing a certain after-school activity or shopping in certain stores will save the family money and secure your future. You may be freaking out inside, but try and stay calm when talking to your kids about money. These dark days could be a time of real growth in your family and when you get through it--and you will--you and your family will come out stronger, smarter and perhaps more appreciative of what you have.

Jen is a freelance journalist who has covered the economy and markets for over a decade at a major financial news outlet. She lives in Scarsdale with her husband and 2 children. Jen has yet to bake a successful batch of cookies.