What to Tell Our Children About the Economic Woes of Today

Photo courtesy of freeparking

I chose the image above because according to the owner it was taken around the Depression Era.  Notice the expressions on the kids’ faces.  It’s as if their faces tell the story of the struggles felt at home.

Kids are intuitive creatures.  They often pick up on subtleties lost on many adults.   Over the last few weeks my oldest child has overheard conversations about money, the stock market, and the broader economy.  She’s also heard news reports about the upcoming election, and how the struggling economy is playing a major role in the ongoing political debate.  My daughter is eight years-old; old enough to pick up on these conversations, but not quite old enough to grasp all of the concepts.  She asks questions about the political candidates, about foreclosures and taxes and job layoffs.  Other parents might be fielding similar questions in response to conversations their kids have overheard. Here are the age-appropriate approaches I recommend for addressing their questions.

Small Kids and Money

My son is only four years-old, and he is oblivious to most problems with our economy.  As long as his basic needs are met he couldn’t care less what the market is doing!  What he would be able to detect is financial stress between me and my wife, which is why we try to limit any discussions about money around him.  Like I mentioned in the opening paragraph, kids are very intuitive.  He very easily picks up on stress in the home, even if he can’t yet identify its cause.  For this reason, try to avoid money discussions around young ears.

Preteens Have Lots of Questions

If your kids are anything like mine their favorite question is, “Why?”   I hear this all the time–why is the sky blue?  Why do you have to go to work?  Why are some people rich and others aren’t?  Some of these questions are easier to answer than others.  Preteens are old enough to understand some basic financial concepts, such as compound interest and primer discussions on debt.  However, any worries expressed in the household over finances and overheard by preteens often lead to insecurity as kids start to think something bad will happen to their family if they go broke.  For this reason, try to keep things general when discussing money rather than fully disclosing your financial problems to your preteen. Statements like, “We have some debt and are working extra hard to pay it off” acknowledge the problem, but focus on the steps taken towards a solution.  That’s what kids this age need to hear most.

Teenagers Have All the Answers

If preteens have all the questions, teenagers have all the answers. Don’t believe it?  Just ask one.  If you are struggling financially it makes sense to include your teenager in discussions affecting your household, such as a parent taking on a second job, or selling the family car to lower your monthly payments.  If kids know about the difficulties you are facing as a family they will be less likely to question the sacrifices made during tough times.  Not that there is a problem with simply telling kids no, but sometimes it helps to explain why you can’t afford to do something or buy something in the context of a larger plan to turnaround your financial situation.

Although you are freely telling teens about your financial difficulties, it is also important to reassure them that things will be okay–that you will pull through as a family, and you are busy making sacrifices to support them.  Older teens may even feel inspired to pitch in by picking up a part time job, and this provides a great opportunity to do a little character building that will last a lifetime.  As a parent, you know your kids better than anyone, so tell as much or as little as you feel comfortable sharing, but always do it with their best interest at heart.


  1. I’ve been saying this for a while now, but if there’s one good thing that comes of this whole crisis is that the next generations might learn a little something about finances and investing in general. The same way kids asked questions about 9/11, not they’re asking about this and they aren’t dumb—they want real answers. The problem is, a lot of parents may just explain it as “Greedy people stole our money and now we can’t spend as much” or “The government stole our money.” They have a pinch of truth, but they aren’t the whole story. I would tell my kids (if I had any) that the cause of the whole problem was that people spent/invested money they didn’t have and you should never spend more than you make.

  2. We’ve framed it in the context of making choices such that if they want to do X we can’t also do Y and Z, or we need to do A and B to be able to afford X.

    One thing I would avoid if possible is using the word “broke.” I can still remember my mother saying we couldn’t do or buy something because she was broke when what she really meant was it was a few more days until payday and the item wasn’t in the budget or she just didn’t want to buy it. Unfortunately, it left a lasting impression that we were in dire straights.

  3. @Froogirl: I also liked Froogirl’s comment. If you have read Frugal Dad for any length of time you know I believe language is important. I don’t like using the word poor, because I often hear parents saying things like, “We can’t buy that because we are poor.” It has a “woe-is-me” sound to it that I don’t want to pass on to my kids.

  4. I have one child and though she is only 6-months old I would like to think that I will teach her how people can afford certain things and why savings is important. The earlier one learns about compound interest, the better – for obvious reasons.

  5. Teenagers do seem to have all the answers, that’s for sure. I’ve been using the words, “not in the budget,” and I think it’s getting through! … even with my 9 year old.

    That being said, in years past, we’ve been blessed enough to have some substantial end-of-year bonuses and have bought quite a lot at Christmas. This year, we’ve told them all that we’re restricting the amount to one big gift and a few smaller ones.

  6. I don’t have any kids yet, but if I did have kids I would tell them to become an entrepreneur and invest in your future by enrolling in a roth ira and 401k account.

  7. I have a question. Yeah, it’s one of THOSE questions, sorry.

    “Not that there is a problem with simply telling kids no, but sometimes it helps to explain why you can’t afford to do something or buy something in the context of a larger plan to turnaround your financial situation.”

    Let’s say you had a spouse who was either a homemaker or went to school full-time, either unemployed or working a low paying job to accumulate money for discretionary spending. You are the breadwinner, you handle paying the bills and setting the budget, the spouse gets by with no idea what’s going on.

    If you have to make sacrifices in tough times, is there a problem with simply telling the spouse no? Saying “because I said so” when he or she asks for an explanation on why their life is being effected? Of course, if the spouse is insisting on something unreasonable, you might have to put your foot down and disregard his or her feelings in order to make things work. But does a family member have to be a breadwinner to have any say in where the bread goes or be entitled to any explanation about why they don’t get to have as much bread as they want? Would you really only allow them information if it’s helpful to you that they have it, rather than because they deserve it? Maybe you’ll say yes, input and explanations are a privilege, not a right, for non-breadwinners. But some people would say that makes you a jackass. Others would call that situation domestic abuse.

    If it’s a problem to simply tell a spouse no, why isn’t it a problem to simply tell a kid no? What makes them less worthy of respect? Especially since you said this in the section on teenagers, who should be in the process of transitioning to an adult level of maturity and life skills if they haven’t achieved it already.

  8. This is a very timely subject.

    I have not really made any effort to talk to my children on this. They have had sheltered lives all these while without experiencing any real hardship.

    I should talk to them. Thanks for this timely reminder.