Breaking Out the Piggy Bank
How to Talk to Kids about Finances During Uncertain Times
There is no easy time to talk to your kids about finances, money, and economics. Even adults have difficulty opening up and being transparent about finances. But with the current economic situation, educating your children about the economy and how it affects your family will help reduce stress, relieve anxiety, and teach them valuable financial skills that they will carry into adulthood.
Children Notice More Than You Think
Children learn from watching and by modeling their parents’ behaviors and mannerisms. Your relationship and feelings about money, budgeting, and the economy will be transferred to them. Remember that you can never teach something that you don’t fully understand yourself. The first step to educating your children about the economy is to increase your financial literacy. Make sure you fully understand the in’s and out’s of financial literacy before sitting down to speak with them. Children will always have questions so brush up on your knowledge. Check out our Financial Literacy tools to learn more.
Be on the Same Page
Make sure that you’re on the same page about finances with your significant other and what you will choose to share with your children. You should be honest with your kids, but you needn’t share every detail of your financial situation. Even practice what you’re going to say to your kids with your significant other or with someone who helps you parent. If your child is getting consistent information from two people, they are more likely to believe and implement what you’re teaching them.
Start with Teaching the Value of Money
A great way to begin your financial and economic lessons with your children is to teach them about the value of money, exchanging work for money, and the concept of saving. Especially since everyone is spending more time at home, try to reward household chores and other tasks with a weekly allowance. Then have them collect their money in a piggy bank to show them how to build up savings. When they want something special – whether it be a new toy, game or even ordering pizza – ask them if they can afford to buy it themselves and if what they want is worth purchasing now, later or at all. Showing kids what it takes to earn money, save money, and letting them to decide when to spend money will show them the value of a dollar.
Explain the Basics of Economics
Once your child understands the concept of earning money through work, saving money, and making budgeting choices, the next step is to explain to them the difference between a “good economy” and a “bad economy”. In short, when the economy is good, people have an easy time finding work and therefore are able to afford things that they want while setting aside funds in their savings account. People aren’t as careful with every little penny and tend to have more money to spend on extraneous trips, items, eating out, etc., because there is plenty of money going in and out of the economy for everyone.
When the economy is bad, jobs are harder to find. There may be budget cuts at work. People may not be able to work overtime or even a full schedule at jobs they’ve had for years. People also may lose their jobs and apply for unemployment during very hard times. People tighten their budgets to make their savings last through the economic downturn until the situation changes. Because people are spending less, there will be less money to go around for everyone.
Use Examples from History
It’s important to note that any economic state, whether good or bad, will not last forever. You can use past examples of the Great Depression, the 2008 recession, etc. to show how the economy will bounce back eventually but also how we learn as a society and as individuals from times of hardship to prevent similar situations from happening in the future. Talk about how you can grow stronger as a family during uncertain times.
Let the Kids Bring You Ideas
Budgeting can be fun if you budget as a family. Let the kids research and think of different ways the family can have fun while still adhering to the budget. Together, all of you can figure out great ways to save. Create a competition to see who can save the most, who can find the best deals, and who can think of fun activities that everyone can do at a low cost. If kids feel included, they will feel less anxious and feel good about helping out.
Money, budgeting, the economy and financial literacy can be difficult subjects to talk about with kids, but they don’t have to be. Teaching your kids about finances can be fun and can also instill in them important tools for managing their own finances in the future. Check out more resources from AmeriChoice Federal Credit Union here to help you educate your children today.