The material presented here is for educational purposes only and is not intended to be used as financial, investment or legal advice.
How to Answer Questions Kids Ask During the Financial Crisis
We’re all feeling the effects of these “uncertain times.” There are a lot of unanswered questions about the future of the economy and our own financial lives.
Keep in mind:
Our children have questions too.
Below are real questions kids have asked about working from home, hearing the word “no” and recognizing noticeable changes in spending. Look over these Q&As to see recommended ways to respond as a parent, bonus parent or guardian. Some children may not have any questions at all and it’s up to you to start the conversation! These Q&As can help guide those discussions.
What is inflation? Why does it matter?
In the simplest of terms, inflation means that prices have increased on the products we buy. You may have noticed that certain things have begun to cost more money at the grocery store. Items that we commonly buy, like eggs and milk, have gotten more expensive, in addition to many other products families often buy.
Depending on the age of your child, you can explain why inflation is worrisome. When inflation causes prices to increase, families may need to cut out purchases and curb their spending due to more constricted budgets just to make ends meet.
How many hours do you have to work? How much money do you get?
Your children may wonder how many hours you have to devote to working daily and how much you earn.
This is another scenario where your child’s age is a factor in your response. If you have an older child, this is a great opportunity to introduce the financial side of working — and some math. After sharing how many hours you work, break your salary down into an hourly rate. You can follow up with a chat about how much groceries cost each week, for example. Together, you can determine how many hours you have to work to put food on the table.
If you have a younger child, keeping your response more high-level, or even making a game out of it by using Monopoly money to express the relationship between what you earn vs. what your household spends is another option.
Openly sharing how much you earn per hour can help your kids appreciate the amount of time you have to work to pay for groceries and other expenses.
Why do you have to work? Why do you have to work as much as you do?
Explaining the why behind working, and how much you have to work, helps children understand the concept of how money has to be earned by working, and during a set period of time, in order to use it to get things we need or want. You can teach that:
“We can’t buy anything and everything we’d like to because we have a set amount of money we can spend, which is determined by how much I make at my job. I have to work X hours each day to earn that amount. This amount allows us to live in this house, eat good food, do fun things, etc.”
You can even encourage your children to “work,” or do chores (just like you do), to earn their own money that they can save and spend on something they like.
Why do you keep saying NO to activities we always do?
These days most of us are spending cautiously, which means you’re likely saying “no” to activities that your kids are used to enjoying regularly. Let’s say you and your daughter have fun baking together. But now, you have to explain that you both can’t bake as much because you’re only buying essential groceries due to inflation. Make sure to say that eventually, you two will bake together again. Suggest another activity too: “We used to do this, but now we can do this. It’s just as fun!”
I want this! Why can’t I have it? I always get a treat!
Your answer is really no different than pre-inflation times when you teach the difference between needs and wants. Just because a child wants something, doesn’t mean he needs it, and he can’t always get what he wants right now.
On the other hand, if your child is accustomed to things being a certain way, they may be confused about the abrupt change. What’s the best way to say, “we can’t buy that like we usually do?”
Michele Clark, a financial coach, emphasizes the importance of using words like, “we have certain priorities for where we need to spend money right now, and this just isn’t a priority” — rather than saying “we can’t afford…” or “we need to make sacrifices.” This way, you’re not instilling a fear of “not having enough,” which can potentially cause a child to develop a complex about money. Also, involve your child in determining if a purchase is a priority. Making the decision can help them understand a need from a want.
How did you handle a past financial crisis?
It’s more likely that older kids would ask this question, and it’s best to respond with honesty and optimism. Share your experience, what you did right at the time and/or lessons you learned. You don’t have to reveal every detail about your past mistakes and current financial situation; however, it’s beneficial to be up front with a teen. Explain how your family’s managing financially amid the current state of the economy, and how you’re preparing for what may lie ahead. The sentiment could be something like:
“We are not going to restaurants or traveling as often, but we can make cooking and staycations at home fun. We’re taking the right steps and making a plan in case an unexpected event happens like I get let go from my job. We were resilient once before and we will get through this no matter what happens.”
A financial crisis is a “silent big deal.” Kids may not notice anything at all or get confused over subtle changes at home. It’s tough for children to understand the economic fallout, the scale of it and how it impacts them and their families financially.
This difficult time is an opportunity for you and your children to dig deep into the concept of money. To help soften the severity of the issue, let your kids know that so many other families are going through this too. There’s a lot of support and help to go around, and everyone’s going to get through this time together.