Children of the Recession: How to Insulate Kids From Financial Fears

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.

Child looking out a window by D Sharon Pruitt on Flickr

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.


  1. one of the reasons that made me want to be extremely very rich and wealthy is growing up hearing the answer for most things that we wanted as “we cannot afford that” or “there is no cash” it is an answer that is extremely depressing, particularly for a small kid to hear

  2. This is something I’ve been worrying about a lot lately, but because we lost my father to suicide due to financial troubles, I fear that this dark cloud will always follow us and especially fear how it will impact my daughter when she’s older. Thanks for this post.

  3. Maybe my experience is different since my parents never divorced. I learned that discussion about money in front of children is important- and we have done so our entire marriage. Our children heard; “we cannot afford that” when my parents (whom never discussed money with us OR each other) “arranged” expensive vacations (we paid our share).
    My husband grew up POOR- and insists that knowing where all the money is belongs to every family member (his parents were married over 60 years).

    There were times we had to stretch to make ends meet- and the stretching included not having favorite foods and paid for pleasures.
    At 26 and 28 our kiddos have pretty good money sense. We still talk about finances with them- discuss savings, investing, spending. We talk in front of the three year old.
    I guess it comes down to – there is a vast difference between arguing and discussion. One is a source of anger – the other is a source of information.

    Still, one day, we may be considered stingy like the lady on Get Rich Slowly complained about her parents. We have plenty for retirement and will, most likely, leave some behind even after retiring early. That is the danger we all have in raising children.

  4. My mom was open with money. I knew exactly how much she had. Because of her broken English, I started doing her taxes at 14.

    Even with that, I still never quite understood the trivial things she scrimped on until I got my first part time job. I think it’s very powerful when you realize how many hours of working it takes to buy a particular item. It was also a powerful driver for getting educated so I could get a better paying job.

  5. I agree with Janette, my parents always told us the status on the financial situation. My dad was the sole provider and he got paid once a month. When things got really tight towards the end of the month we knew what we would be eating and why. We never had to ask or question the situation.

    I am a single mother and my daughter knows what our financial situation is. Last year when things got a bit tough, she was the one who was looking for ways to make money for the things she wanted. She understood that she has to make responsible actions. When her friends were paying $100 for a designer sweatshirt, she looked and responded what all she could do with $100 and not just throw it away.

    We are not poor, but I have taught her to put money away and to plan for tough situations. She really has a handle on the needs/wants.

  6. My middle=class parents said “We’re not rich, we can’t afford that” when we kids asked for the latest gizmos we saw on TV. I didn’t get any feeling of self-deprecating from it, rather it started to give me a framework for understanding that if you don’t have the means, you adjust your expectations. It’s a lesson that’s been valuable throughout my life.

  7. My favorite way of explaining when we do not buy something will often come with the phrase, “it isn’t in the budget right now.” My son understood the analogy of spending the $ 60 he saved for a video game on candy. He can afford both, but what is his preference or which is the better choice. He also understands that as parents we have money but it is all in making smart decisions when it comes to utilizing that money. He doesn’t feel deprived and learned how to make some savvy choices on his own. You just have to make sure you are informing your children, not scaring them. This is the beginning of being in control of your money and not the other way around.

  8. Evangeline – How wonderfully stated: “You just have to make sure you are informing your children, not scaring them.” Great advice for more than just money (personal safety, current events, etc.) Thanks!

  9. My kids and grandkids have always been aware of the fact that the family does not choose to spend money on things that are not necessary, with the exception of birthdays and Christmas. They learned not to ask at other times. They all were given a piggy bank at birth, and had an active part in putting money into their Kangaroo Club kids savings account as soon as they could write their name.

    In bad economic times, I think it is more important to have learned to do-it-yourself than to have a side hustle. If you don’t have a reason to spend the money, (because you can do it yourself), then you don’t have to make the money. Once you are debt free and have a decent savings built-up, you can get by on very very little per month.

    Being debt free is the MOST important aspect of financial planning, in my opinion….it gives you such freedom from stress and the need for much money.

    For my little world, $400/month is my magic bare bones budget – that covers property tax and house insurance, utilities, groceries (with a garden and fish/clams), gifts, insurance for one vehicle, a little gas, and meds.

    • I’m with you, Marci . . . and you’re the first one I’ve tracked onto that does a better job with ‘poverty’ than I do — so congratulations! I could probably do it on about $600 without feeling too uncomfortable, but the Universe allows me a bit more than that now, what with food stamps and such. However, I live without a vehicle, and that has always been the critical difference for me. It has certainly made the difference health-wise! At 83, I’m still going pretty strong. Bless you, Marci…


      • Thanks, Irv 🙂 I won’t say I’d like to live that way forever, but I know I can do it if I have to. Normally I get by on under $1000 month now anyway.
        No food stamps here – but a darned nice garden, and the bay and rivers are within 15-20 minutes – so I wouldn’t starve 🙂 Just picked up a book on edible seaweed and kelp identification – in case times get really tough! lol And barter us always good – sewing and repairs, cooking, canning, typing & paperwork, etc for food 🙂

        On $400/month, I’d be mostly walking also – but luckily most everywhere I need to go to is within a mile walk -bank, PO, groceries, dr, and hospital, and mainly, the library 🙂 Some of my kids/grandkids live further away tho – that’s why the truck. Not much for public transportation here!

  10. Excellent tips there Jason. When I heard “can’t afford it” I think “why” and then I go out and try to work to be able to afford it.

    I think I figured out why a lot of your posts have been darker regarding the economy. It’s due to geography. I wrote “Am I living in a parallel universe” partly due to your posts.

    Can you write more about the economy in your neck of the woods?


  11. Nice article, I’ve tried to foster that entrepreneurial side with my kids by selling things on ebay. At the very minimum, they learn shipping skills to help them if they need them in the future. And if not, ebay itself is a nice side hustle.

  12. My mom always took time to explain why we couldn’t have certain things. We were an average family but love to travel. So when my brother and I got the “gimmies”, she would point out that if we got the “gimmies” it would take away from our travel and usually with reasoning like that it was easy to understand, toys versus travel.

  13. My parents always talked about money in front of me. Growing up on the farm, we always new the prices of commodities, helped fill out the deposit slip for the bank and the check for the electric bill. My parents explained what things they valued and what things we could do without. When we lived in a really crappy house we were informed that we were saving for a new house and we’d just have to make things work in the meantime.

    While kids maybe don’t need to know the nitty gritty, there’s no reason to paint them a pretty picture either. There’s nothing wrong with saying, “Dad is unemployed right now, so we cannot afford to take a family vacation this year. Instead, would you help me plan a picnic at the park this Saturday and maybe we’ll dig up the old tennis rackets for after we eat.” It might be a surprise how much kids can keep you honest and help work towards goals.

  14. I grew up poor. My parents had to worry about money. I started work at age nine and all my money went to pay family bills. I also went through starvation at times and I never got any new cloths. By contrast, I do different with my kids and I agreed with alot of things you said. But, kids need to hear as growing up that you cannot afford things and explain why. Sometime it means that you don’t have any money at all. Sometimes it means that all the money you have at the moment is bugeted for a future something. Any money my kids made has a percentage on it. 10% church 10% spending 25% chothing 55% future planned savings for their specific needs or wants. My three oldest (20, 18, 17) pay for own clothing, cell phone, and transpotation. Until they finish school then if still home they will pay room and board. My oldest has 7,000 savings and my next two sons have bought a car each and still have 2,000 – 3,000 savings. If something comes up we talk about what they want and make a best decision depending on the situation. Every once in a while I go over the family budget and how much dad makes. We are a family of 6 living on one income. My husband has worked at a blue colar job with no college and makes under 32,000 a year. Plus we homeschool and spend about 5,000 a year on school. My kids have a healthy attitude on money and jobs. My one son who hate school is dogmatic about going to college just because he doesn’t want to flip burgers for the rest of his life.

  15. My parents discussed money with us, but not exact amounts. I grew up knowing to live below my means and save a bunch, but I wish I had known real numbers in my teens so I could have saved even more or started a Roth IRA.I think information is power, so discussions about everything are good, but fighting should be done in private.

  16. I agree with you that it is important to shield your children as best as you can from money issues, whether they’re long-standing or not. That’s how I was raised, and I think it is an important part of maintaining a secure growing environment for children.

    Having said that, times are very different today than any time since the Great Depression. There are people who are genuinely poor out there, and they’re not poor because they’ve overspent themselves, or because they’re somehow morally inferior. They’re poor because wages have stagnated and the few jobs today’s economy produces do not pay a living wage that allows anyone to live a decent life.

    Now, by decent, I don’t mean being able to buy big screen TVs and all that rot. I mean being able to 1: Feed yourself and your family decent and whole foods, 2: Afford health care for yourself and family, 3: Afford to put away money for your children’s education, and 4: Be able to take a week’s vacation once a year.

    The poor are a growing segment of the population. Income distribution in this country no longer looks like a nice bell curve…it is now heavily weighted toward the upper one percent, with the rest of us falling behind, and more and more families are falling into poverty. I don’t know that these families have much choice in what to say to their children, especially when it comes down to the basics that they can’t afford.

    I think the best thing we can teach our children is that poverty is not something that happens to someone because they’re inferior. It can happen to anyone, at any time, even if they’ve done all the right things. At least that is the reality of today’s economy, and if we’re not careful, the future economy as well.

  17. Isn’t the phrase, “…we can’t afford it…” the truth in many situations? What is wrong with the truth? There are limits to everything in life, including our wallets and credit cards. I feel kids should know about money and the financial status of their parents. It can be a bit distressing at times, but it can also be exciting for them as well. When I paid off the house a week ago, my daughter was more “psyched” about it than I was (I don’t think reality has sunk in yet). But her comment to me was, “Mom, we’re rich!” I know what she meant – not monitarily, but we own our very own house, lock, stock and barrel, so yes, we are rich, in that sense.

    • I thought the same thing at first when I read this article, but I think the FrugalDad justified it well when he said, “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.” In many cases it’s not really the truth that “you couldn’t afford” a new toy, but rather you’re making a financial compromise, to do something else with the money. I think that it’s great for kids to know the truth, but it’s important to make sure they don’t misconstrue “the truth.”

      On a side note, I thought that this was a fantastic article.

  18. After 37 years of marriage my parents are still together and I have never seen them fight about money. My dad has a strong work ethic that he instilled in my brother and I and even though he could retire, he is still working. Growing up I remember him always having a few irons in the fire so to speak as he always had a side job or project. In fact those side jobs, along with a few scholarships, paid for my college education. Like my dad I believe in working hard and plan to instill this same mindset in my son. At 7 years old, he has chores at home, and has already developed an entrepreneurial spirit as he is always coming up with ways he can make money. While i don’t want him to become obsessed I encourage this spirit and help foster in any way I can.

  19. Pretending that things haven’t changed monetarily can be a disaster, especially for women after a divorce.

    Mom tried her best to keep up appearances and so hung on to our over-sized 5,000 sqft. home, even professionally redecorating it, which rapidly consumed the several hundred thousand dollar settlement which would have come in handy years later when she developed her terminal illness.

    We just helped another mother move from her very large home – which she redecorated and bought all brand new furniture (now in storage), after her soon to be ex-husband moved out.

    She’s telling her kids she will soon move them back into another 4 bedroom house, which is grossly unrealistic considering her financial situation (a few years of alimony left, she back in school)

  20. I strongly disagree with this article. Although I do not have any children yet, I will make it a point to let them know how hard it is to financially support a family so I can get them started early on saving more and spending less.

    • …and thinking that to be much more important than discovering who they are and what it is they want to do in life. I call that short-changing your kids with fear and insecurity.

  21. As far as we may not want our children to be affected with the financial struggles around, it is just the mere fact that every corner of the world are damaged by these problems. Dealing with financial stress needs to be within a good control so as to provide a wall that will cover up for your children. We can always live happily with the simplicity of life. It may be a hard adjustment but fulfilling the duty to protect our children comes to be the driving force to still fight the battle despite all the obstacles in the way.

  22. I grew up in a family that cycled between flush (steak) and broke (rice & beans), but also on a steady diet of the old children’s classics that tended to prepare one for reverses of fortune, and also gave some sense of perspective on what real privation is like. Depending on your children’s ages, exposing them to some of that literature may be an easy way to lead into conversations about money, wealth, poverty, hardship, etc. Examples: Heidi, Swiss Family Robinson, The Egg and I, Oliver Twist, the Little House on the Prairie series, the Grimm Bros fairy tales. I learned to read on Heidi, and ever after considered myself tolerably well-off as long as I had bread and cheese and didn’t have to milk my own goat!

  23. The article is GOOD ADVICE! I grew up during the big 1930s Depression and though my family was hit very hard by it (when I was 6) and our life changed radically at that point, my folks absolutely never brought finances into family discussion. A kid is a lot more affected by the way his parents handle something (i.e., cooperatively or antagonistically) than by the financial level they are living at . . . to a kid, life just is what it is; but security is generated by the social atmosphere of his family life.

  24. I’m with you – except I do think kids need to hear “we can’t afford it” when it comes to luxuries. Certainly they need to feel secure that their basic needs will be met – food, clothing, shelter, transportation. But beyond that, they need to understand that money is finite and that we have to make choices about the “extras” we purchase. For my kids at their age – it’s understanding that their birthday presents are not going to pile up as high as Pikes Peak. Later, it might by why we choose to get them a clunker instead of a racy new sports car.

    If they never get that lesson – that you have to pick and choose – you’re doing them a huge disservice and teaching them that they can have everything. They’ll grow up and start spending their own money (and then borrowing like crazy) to feed that misconception.

  25. Jason,

    As usual, a terrific post. I’m so glad you mentioned the importance of teaching kids about money from a young age. Organizations like the PTA, Credit Union National Association and the National Endowment for Financial Education all advocate starting BEFORE they reach kindergarten with basic stuff like understanding the difference between needs and wants, making smart money choices, starting an allowance to teach them to manage money and setting goals. I was just talking to a colleague who is also passionate about youth financial literacy and she mentioned that she is shocked at how many parents don’t give their kids an allowance. It’s so easy to do and it really helps empower kids. I think it’s just as important as learning math or reading.

    For a little more on youth financial literacy, check out my recent guest post on Wisebread,, and let me know what you think.

  26. I wrote an article referring to this one where you talk about teaching kids to save for opportunities rather than save for emergencies. You might be interested in checking it out.

  27. Terrific post! Good money habits start early, so why not encourage your children to be fiscally sound at a young age? At LorMet Credit Union, we encourage parents to teach their children to be responsible with money and still let them enjoy being kids. If you give them an allowance or help them set-up a savings account at a local credit union you can teach them some important lessons in life.

    We have wrote some articles on encouraging thrift in the young. You might be interested in checking them out.