Thursday, April 17, 2014
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Tough Times Series—Speaking of the Economy ... What Do You Tell Your Kids?



The playground at school is like a kid's version of the water cooler at work, a place to discuss hot topics. Between that, TV, and your conversations, your child is bound to have heard talk about the troubled economy—maybe a friend's parent has lost a job, or maybe your family is affected.

It's a good idea to find out what your children have heard and are thinking about the economy, and to reassure them if necessary. You may see warning signs that they're concerned. "They may act withdrawn, or different from normal," says Francie Alexander, chief academic officer at Scholastic Inc., New York.

"Maybe they don't want to accept their allowances, or they come home from school and ask if you're going to lose your job, or if they'll be able to go to college. You can say, 'It looks to me like you're worried; let's talk about it,'" she continues. "Start by listening or asking questions, and then share information appropriate to their ages and stages."

What to say

It's important to be factual, and to speak at their maturity levels—which aren't always the same as their age levels, adds Rick Kahler, CFP, president of Kahler Financial Group in Rapid City, S.D. "Obviously you'll tell a teenager more than a four year old, but that's why you start by asking questions, so you can build on what they already know."

Teaching children how to use money is an important skill.

But do talk about it. "The worst thing parents can do is not talk about what's going on, especially if it's affecting your family. Kids know something's up; they sense the stress," Kahler says.

You can adapt the conversation for any child. "For little kids you could put it in the context of an upcoming holiday and how the economy is affecting your family," says Alexander. "Tell them, 'We'll still buy things, but there's less money right now.' Remind them that the purpose of the holiday is to be together as a family, and that even if you need to be a little more careful with money, you'll enjoy your time together."

Younger children require less detail. "If I were losing my job, I might say to my five year old, 'Daddy's going to look for a new job.' It's very succinct and not alarmist," Kahler says.

They need to know the situation and that you have a plan. "You don't need to say much more to younger children, but they're comforted when they know what's going on, what might change in their lives—such as not going to the movies for a while—and that you're working on it," says Alexander.

Children who are a little older and more mature may ask further questions. Answer them directly, but without complicated theoretical discussions that could cloud the issue.

The worst thing parents can do is not talk about what's going on.

Teenagers will generally appreciate more details. "I might tell them there'd been company-wide lay-offs, that jobless numbers were going up in the community, and that I was concerned," Kahler says.

"They'll be entering the work force themselves, or maybe saving for college," Alexander adds. "You can talk about that, and about how they can help the family. They can conserve what they have and be more thoughtful about their wishes and needs."

Be honest and upfront

With any age child, if you're sad or worried, you can say so. "Even a younger child will understand if you say, 'Daddy's sad about losing his job,'" Kahler notes. "To deny the emotion doesn't help—they can sense it, so it's better to explain it."

Just be sure you have appropriate boundaries when talking with kids about money. "Don't lean on your child for support. If you need to vent, or are extremely fearful, get your support needs met through another adult. With children, yours should be an information-giving role," says Kahler.

Watching the news together can provide opportunities for discussion. "It's a wonderful way to use what's going on to find teaching tools," Kahler says. "In my opinion, this whole crisis is one of excessive debt, so you can explain why it's important not to spend more than you make. With older children, you can talk about not using debt for consumer spending, and how a budget can set you free. If you've made poor choices and you're working your way out of debt, you can talk to your kids about that.

Kids need to know the situation and that you have a plan.

"If your family can no longer afford certain things, be up front about it," he continues. "Say, 'We're doing a little budgeting, and here are some things we're not going to buy any more.' Share why. If your kids are old enough, try to engage them in the process of how to reduce expenses."

Kids usually rise to the occasion and want to help. "Make a game out of it; it doesn't all have to be dreary," Alexander says. "You can find cheap and cheerful things to do: Look for free movies and other community activities, go to the public library instead of buying books, and let the kids help clip coupons. Together, look for the best deals when you do buy, and encourage saving, even if it's only a penny. Plan ahead so you spend wisely."

Teaching children how to use money is an important skill in today's world. "If you haven't done that, take this crisis as an opportunity," advises Alexander. Your credit union likely has free resources and programs that can make it easy.

Find out what your children have heard and are thinking about the economy. Reassure them if necessary.

Also, remember the crisis won't last forever, and let your kids know that. "You might say, 'We're cutting our YMCA membership for a while, until dad finds a new job.' Reassure them that as a family and as a nation we'll get through this tough period," Kahler recommends. "Make sure they know their help is important and that they're an important part of the family. We can teach our children resiliency by demonstrating ours."

The three S's

It's vital that today's young people know how to manage money, and Francie Alexander, chief academic officer at Scholastic Inc., New York, offers this simple rule for teaching kids of any age. "Teach the three S's: save, spend, and share," she suggests.

"At an appropriate age level for your child—and it's important to start as early as possible—talk about saving for what you want, spending wisely, and giving to those in need," she says. "A young child can put a penny in a piggy bank every week. An older child can open a credit union account. Spending's not too hard to teach—talk about it when your kids shop with you. And there's always someone worse off than you; talk about how you can share your money and time."

Reassure them that as a family and as a nation we'll get through this tough period.

Rick Kahler, CFP, president of Kahler Financial Group in Rapid City, S.D., puts it another way for older children. "Tell them that out of every dollar they make, they should take out 10 cents to pay taxes, 20 cents to save for the future, and 10 cents to give back to the community. The rest is for spending. They should pay their fixed expenses first and anticipate future ones, such as car repairs. What's left is for lifestyle—or fun—expenses.

"If Americans could do that, it would turn the whole economy around," he adds. "That's a big message to get across to future generations."

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