Turning Economic Hardship into a Lesson on Financial Management
Some parents attempt to shield their children from the distress of financial hardships. They avoid the topic even if the family is experiencing job loss, foreclosure, or other financial losses which impact their way of living. Children are highly sensitive to the emotional state of their parents. They can sense when something is wrong. Leaving it up to the child's imagination to figure out what the matter is can result in a total misunderstanding of the source of tension and its possible resolution. Children need to be told what the problem is and given ways in which they can be part of the solution.
A young child can be told the family situation has changed and what the family will do now. Even quite young children can help with chores around the house, help with shopping by checking items off the list, save in a jar any coins they find in the parking lot to buy holiday presents, and help find the lowest number (price) for a box of cereal. These simple skills can develop into important financial management skills like saving and comparison shopping.
Explain to a teenager that you have lost your job, you are looking for a new one, but until a new job is found, money will be restricted. They can help by getting their own job and contributing a portion of their pay to the household. (Just like you have been doing for years to support them.) Additionally, they can help with cooking at home to save money on food; make do on a smaller budget for clothes, and use comparison shopping skills for "must-have items" to help stretch the family budget further. Of course, they are not adults and should not be expected to shoulder all of the adult responsibilities in the household, but showing them how they can positively affect the situation allows them the opportunity to be helpful and not feel victimized by circumstances.
Children aged 10 or more can be given a budget and taught how to spend the money to meet particular goals. Explain what the money is for, how much they have available, and any other factors that are important. For instance, a child might be given $50 for back-to-school supplies. Tell them what must be purchased (based on the teacher's list). Show them how to compare prices in a particular store and also between stores. Show them how they can get more for their money at a discount store. If the budget is for clothes, shop yard sales and thrift stores in addition to discount stores.
Teach children to distinguish between a "need" and a "want". A "need" is something required for survival. A "want" is everything else. There are even "wants" disguised as "needs", particularly if an advertiser can get your child to listen to their advertisement. A steak is a "want", while a protein source in your diet is a "need". You can meet the need by buying beans or eggs or chicken; all of which cost much less than steak. Electronic games are nice-to-haves; not need-to-haves. Designer clothes and sneakers are nice-to-haves; not need-to-haves.
Teaching children basic financial management skills is critical to their future success. People who do not know how to properly manage money struggle to survive. While the economy will fluctuate between prosperous and dismal, sound financial management can provide a stable basis from which to operate. Learning these strategies empowers your children with skills which will be useful throughout their life and ease the budget pressure the family is under today.
