With unemployment and foreclosure numbers climbing, chances are high that you have friends or family members affected by this recession. When a close friend or family member loses their home, or their job (or both), it is frightening on several levels. You begin to wonder if the same could happen to you. This fear of economic uncertainty causes anxiety in many children, too.
My parents divorced when I was very young, and I don’t have many specific memories of them arguing, except over money. Unfortunately, that’s a common memory for many kids, especially when economic times are tough. While it is impossible to shield kids from all that goes on around them, I happen to believe money worries are one of those things we should not share with kids. There are a number of ways to do that – some very specific, and some more subtle.
Don’t Fight About Money in Front of Kids
This one seems the most obvious. When it comes to transferring anxiety over money to your children, there is no faster way than to fight over it with your partner. Asking couples not to argue over money at all is a little unrealistic, so when differences arise, at least try to do it in private and out of earshot of your kids.
Spenders and savers are bound to clash, but when they fight in front of kids they give kids something to worry about beyond Mom and Dad fighting. Will we run out of money? Is Dad losing his job? Will we have to move? Will we have money for food? Even if parents are unsure about the answers themselves, they owe it to their kids to exude confidence when it comes to money. If things really do get bad, emphasize that no matter what, you’ll all be together and that home is where you make it – wherever that may be.
Avoid Language Like “We Can’t Afford That” or “We’re Poor”
This is one I’ve had to relearn myself. When kids ask to buy things, and money is tight, I try to rationalize with them instead of simply saying, “we can’t afford it.” Tell kids that instead of spending money on toys this week, you need to focus on buying some basic things like food and gasoline for the car. Ask them to come along to the grocery store to help pick out a few favorites. If you simply say you can’t afford something, kids will begin to wonder what else you can’t afford, and this could cause worry.
I will not allow anyone in our house to use the word “poor” when describing our economic situation – even when times were pretty lean in our own household. We might have been broke, but we certainly weren’t poor. It’s more than semantics. The word poor seems to connote inferiority, or having some unfortunate circumstance. We suffered from neither. We simply spent more money than we earned and had to live on far less to turn things around. We may have been stupid, but we weren’t poor!
Now, let’s shift away from things not to do around kids, and focus on some positive things to teach kids to help them with their own financial futures.
Start Teaching Kids About Money
When I was growing up, money was taboo. Parents would no more rather talk about money with their children than their love life. While this is still true to an extent, I think most of us have recognized that kids need to be more aware about the potential financial pitfalls out there than we were.
Start giving kids an allowance to budget their savings, spending and giving. Help them open a savings account and begin to teach the mechanics of a bank account – completing deposit slips, balancing a checkbook and explaining how compound interest works.
As kids get older introduce them to increasingly more complicated topics like investing, borrowing money, insurance, etc. By the time they are teenagers they should have a good grasp on Personal Finance 101 topics to better prepare them for life.
Encourage Saving Over Spending
As adults, we know it is prudent to put back a sizable emergency fund of several months (I actually recommend a full year) of basic, household expenses. Because kids are not responsible for everyday expenses, it is hard to get this message across to them. Instead of focusing on saving money for emergencies, teach kids to save money for opportunities.
Here is a very subtle example. Saturday night I took my son to Toys R Us. He had accumulated allowance money, along with a birthday gift card or two. I helped him find a few things in his price range, and naturally, he wanted it all, which would have wiped out his savings.
I gently reminded him of events coming up where he might like to have some money, and explained if he spent all his money today he would get no more until he received his next allowance. He came to the conclusion on his own that saving some back for a future opportunity was a good idea. He put back all but one toy and we left with cash in hand – I was a proud frugal dad!
Foster Entrepreneurialism in Your Kids
My parents and grandparents were probably a lot like yours – they worked 40-50 hours a week, punched a clock and recharged over the weekends. After doing this for several decades they were given a cheap retirement gift, maybe a small pension, and a retirement send-off. Well, times have changed.
The recession has underscored the importance of developing an entrepreneurial streak at a young age. Chances are very slim that your child will graduate college, pick one job and stay there for 40 years. More likely, there will be many jobs with many employers, and many periods of being “between jobs” in their lifetime. Wouldn’t it be great if they developed a “side hustle” to get them through those periods of unemployment, or to supplement their full-time income all along?
Perhaps you enjoy building things and have turned your one-time hobby into a side hustle building decks and fences on the weekends. Get your kids involved in the process as they grow older, and perhaps you can pass along a valuable trade. Even if they become accountants or fire fighters, having the knowledge and experience of a trade to fall back on could be incredibly valuable to them over a lifetime.
The point is not to stifle your kids ideas by forcing them into some ideal career path you have selected for them. Allow them to cultivate their own ideas. Over the next few decades, personal branding, and the branding of individual ideas will likely be hotter than any particular industry. Think about it – iPhone apps may be the next lemonade stand!
In a way, social media, and new media, have greatly expanded the opportunities for kids to create new products, explore new ideas and push new content into the mainstream. It’s never been a better time to have an entrepreneurial mindset, and fostering that in your children at an early age is invaluable.