How to explain financial problems to your child

Regardless of their age, teaching your child about money is important because when he becomes an adult, the chances of him facing a financially stressful situation are high. Knowing how to handle it, whether it's a national recession or a personal case, is extremely helpful. Even though important financial decisions are usually made between adults, in some circumstances it may be helpful for your little one to be involved in the discussion.

Economic stress is real and can take its toll not only on you, but on your children as well. 

The American Psychological Association (AAP) found that during the financial crisis or pandemic, over 90% of children were aware that their parents were stressed by the way they behaved.

Among the most important topics you can discuss with your child are: saving money, donating to charities, spending wisely and having emergency savings funds.

To make sure these conversations and lessons about money are effective, there are certain things you can do. In this article, you'll learn how to define financial issues so that your little one can understand them, how to synchronize conversations correctly, and how to make sure that money lessons are remembered by him.

Important to know

It is recommended that you talk to your child about financial problems as they arise and use such moments to teach him important lessons about money.

• Create a plan for when and how you will talk to your child about financial difficulties.
• Choose a time when you have the little one's full attention and use an appropriate tone.
• Adapt what you say to your child's age and don't be afraid to involve him, for example, in drawing up the monthly budget.

When to talk to your child

Talking about financial problems in the family is not something that should be done out of the blue. Consider a time and place that shows the seriousness of the situation but allows your child to feel comfortable. Carefree mornings before school or bedtime story time are probably not the best times to talk about money.

Instead, consider talking on the weekend when your little one isn't rushed by the hustle and bustle of school or activities. For example, before you have dinner with your family, when you're about to start a fun game night, or when you have a long drive to go.

How to talk to your child

Addressing a sensitive topic like financial matters can be challenging, but it's important to proceed carefully.

• Understand the information you will pass on to your child: Before you talk to your little one about financial difficulties, make sure you really know what you're talking about. For example, if you are discussing volatility in the stock market and how it is currently affecting the country, you should research ahead of time. Or, if a family member has just lost their job, make sure you understand the circumstances and are prepared to express yourself in terms your child can understand.
• Pay attention to the language: The words you speak have an impact. If money is causing you a high level of stress, tell your little one what caused the stress and how it is affecting your family. Even if the child realizes when something is happening, he does not always know the reason. Use this moment to explain the situation clearly.
• Consider the tone used: Sometimes serious conversations can scare your little one, making him think he's done something wrong. Be kind and empathetic so your child feels comfortable asking questions. Reassure him that although you are serious, what is happening is not his fault.
• Continue the conversation: If you are facing a number of financial problems, one conversation may not be enough. If you've lost your job and communicated this to your child, celebrate a victory when you get a new job. If you have to move because of a job or an irresistible opportunity arises, inform the little one about this change as well. Don't stop at just one conversation: let him learn to trust you as you relay important information.
• Prepare for dialogue: Let the child ask questions and don't be afraid to answer them, even if you don't know the answer right away. Find answers as practical and fun as possible, and don't be afraid to tell him "I don't know" - sometimes that's all you've got, and he'll know it.

Whatever the communication method, teaching your little one about financial problems and what solutions are available can help them in the future when they become adults.