I often get asked when parents should start talking to their kids about money. My father started his Money Lessons with me when I was thirteen, but I began teaching my girls when they were only toddlers. It’s my belief that children as young as age three begin observing their parents’ money habits.
It makes sense when you think about it. Our children learn how to walk and talk by mimicking us. Why wouldn’t they watch how we interact with money? These observations— good or bad—are their first introduction to money and create a long-lasting impression on them that they often carry into adulthood. Your money hang-ups become their money-hang-ups. This is one of the reasons why I encourage you to take stock of your own relationship with money, then demonstrate good financial behavior to your children.
The other question I get asked frequently is how do I talk to my kids about our family’s financial situation, particularly when there is substantial debt involved? Debt is often a foreign concept to kids as they have no personal experience with it, and it can be scary for them once they understand what it means.
How to Talk to Your Kids about Debt without Scaring Them
Your goal is to get them onboard with your debt repayment efforts while minimizing their fear at the same time.
1. Create a Comfortable Environment
While I’m generally not a huge fan of sit-down money conversations, this is one topic that probably warrants it. However, I suggest keeping it in a casual environment, perhaps over dinner. The more of a “to-do” it becomes, the more nervous your kids will be. You want to project confidence and control, but still create an open atmosphere where their questions and concerns are welcome.
2. Have Your Plan in Place
Before you talk to your kids, have a plan in place that both you and your spouse fully support. You’ve crunched the numbers, know what needs to be cut, what changes will directly impact the kids and most importantly—are prepared to answer these two questions:
- How did you get into debt? Whether you tell them upfront or not, they will wonder how it happened. Keep your answer simple. It’s not the time to give them a lengthy explanation or try to rationalize your behavior.
- Why is it important we get out of debt? Assuming your children are about to undergo some lifestyle changes, you need the reason “why” to be compelling enough to get their buy-in. Understandably, these changes will go into effect regardless, but it will be much easier if your kids are supportive, rather than combative.
3. Focus on What It Means for Them
You don’t have to give your kids play-by-play of the steps you’re taking to eliminate your debt. Instead, focus your attention on how it affects them and how they can support your efforts. Know in advance what will most likely trigger a meltdown, so you can help them see the bigger picture. Offer alternatives, such as helping them cultivate their entrepreneurial skills, so they can earn enough money to continue participating in their favorite activity or buying the latest gadget or designer jeans if those things mean that much to them.
Repeat often how getting out of debt will make their lives better. Give them specific examples. Ask them for their support and let them know how much you appreciate it.
4. Keep Having Fun as a Family
Depending on your situation, your life may become quite spartan for a period of time. One mistake I see families make in this situation is to believe no-frills means no-fun. Au contraire, my friends. You may not be able to afford extravagant vacations, but there is no reason why you cannot have fun. You just need to get creative. Look for free family events in your local community. Plan a family day at a local park or beach and pack a picnic lunch. Go camping, even if it’s in your own backyard or Grandma’s. Borrow a movie from the library or a friend and have a make-your-own pizza and movie night.
Look for ways to earn money together. Hold a garage sale and agree that 10% of profits can be used for family fun. Or have your kids sell unwanted toys and clothes on Craigslist or eBay and agree on what percent they can keep (maybe even all of it) and what percent goes towards eliminating family debt.
Live a “Rich” Life Now
We think in order to live a “rich” life that we need to spend lots of money. This belief has caused many families to live beyond their means and go into debt. In my opinion, a “rich” life isn’t based on how much money you spend, but how you use your money on what matters most. And by getting yourself out of debt and giving your family financial stability, you are living a “rich” life now.