How to talk to kids about financial constraints

Isn’t it better to keep kids away from money matters? Why burden them with it, when they can neither completely understand nor help? This is how the average parent thinks. While it may be true for very young children, it is not wise or advisable to hide financial problems from them. They are bound to find out for themselves, and that might make it much worse.  

Why talk to kids about financial crunch?  
The answer is actually very simple. There are 2 reasons: the kid is bound to grow up, and they live in a world where the value of money is unavoidable. We are not suggesting that you scare a teen by revealing you are a poor dad or an almost bankrupt mom, or terrify a pre-teen by telling them you have just no money. In fact, talk to them logically about financial problems precisely to avoid this kind of shocking revelation.  

Start by talking according to age and maturity level 
You are the best judge of your child’s maturity. Kids may interpret the issue wrongly, blowing it out of proportion, or blaming themselves for no reason. That would create unnecessary anxiety and stress, which the child may not be able to express, or carry as a hidden fear into adulthood. If you have not been able to pay EMIs, explain the exact situation with a strong reason and without blaming anyone unduly. Don’t make it sound so scary that they begin to fear loans and banks.    

Remain optimistic but grounded while talking money 
Unlike many health or climate problems, financial problems always have a solution, even if it’s a seemingly negative one. If you have had a pay cut or been laid off, don’t share the panic. But share the scenario clearly and calmly. Quantify financial disaster. For example, tell them you won’t be able to buy them games or gadgets till you have more cash inflow. It’s because the money you have, needs to be saved to continue with daily life. They will get it.  

Don’t lie or cover-up about financial distress   
Most kids nowadays are smart enough to sense financial trouble at home by age 10. So, if you are facing a crisis, it’s best to inform the kids. This will not only put the children at ease and confirm doubts they were having, but also help you impose budgetary restrictions without hiding or lying about the reason.