Thriving in tough times: valuable money lessons

Q: My family is going through some financial problems. Is there anything I can do to help my children understand?

A: No matter how hard you work to make your family financially secure, sometimes life throws you a curve ball. Maybe you, or your spouse, have been laid off recently. Perhaps your marriage has broken up. Or the strain of living paycheck to paycheck makes you feel perpetually on the verge of crisis. Whatever the nature of a parent’s money woes, you can count on one thing: Everyone in the family, including the kids, will be affected. If you’re afflicted with financial problems, here’s how you can help your child understand and deal with them: Be honest — up to a point

“Kids can handle more than we give them credit for,” says financial planner Adriane Berg, co-author of The Totally Awesome Money Book for Kids and their Parents. Although your inclination may be to shield your child from serious financial problems, resist that impulse. Chances are, you won’t be entirely successful at keeping the matter under wraps anyway — and the inevitable hushed tones and overheard snippets of dire-sounding conversation are likely to prove more stressful for your child in the long run than the simple truth would be. As Berg puts it, “It’s not the lack of money that will upset most kids, but the anxiety and the feeling of insecurity.”

Of course, telling your child the truth about your financial situation doesn’t necessarily mean telling the whole truth. And it certainly doesn’t mean sharing your fears or concerns about what the future may hold. Older children may need a few more details. But don’t be fooled by the seeming maturity of many school-age youngsters into making a full disclosure or turning them into confidantes. Instead, follow their lead in determining just how much information they’re ready to handle. Focus on what’s important

For babies and toddlers, the most difficult part of a family financial crisis isn’t the lack of money, but the resulting changes in the patterns of their everyday lives. For kindergarteners — who are much more attuned to the material world than pre-schoolers — on up, the pain of a financial crisis may be more direct. A child’s typical first worry may come as a surprise to most parents: “Will we have to move?” Your answer should depend on your circumstances, but the most important thing to get across is that you do not intend to surprise your child. He will be told important news concerning the family as soon as there is anything to tell. As much as possible, keep up activities that matter most to your child even when money has been tight.

Create new rituals
Families in the throes of a cash crunch must by necessity find ways to reduce their spending. But cutting back doesn’t have to mean cutting out all the fun and frills in your child’s life. The key is to find less expensive substitutes: making pizza at home, and letting the kids spread the tomato sauce and sprinkle on the cheese, instead of going out to dinner.

Whenever possible, involve the kids in the decisions about where to cut back and what to do instead. They’ll be less likely to balk at the new restrictions if they’ve had a hand in creating them. Economising can then become an accomplishment. As difficult as it may be to believe while you’re in the middle of a serious money crunch, some powerful good may come out of the tough times for your child. Kids need to set their parents’ managing financial problems — how they adapt their lifestyle, rework the budget — to learn those skills themselves. Adversity helps children learn how to bounce back. It’s also important for a child to learn early on that many people face financial problems at some point in their lives, but they can work through them and emerge stronger as a result.