How to Talk to Kids in a Tough Economy

Category: Financial Health

How to Talk to Kids in a Tough Economy

Children often know a lot more than they let on. Maybe your kids found out that their friend’s mom was laid off at work, or maybe they overheard words like “recession” and “unemployment” on the nightly news. While it might be tempting to avoid talking about money at a time when financial hardship is a reality for a lot of families, it’s actually an ideal time to introduce some important concepts to kids.

What is the Economy?

Your child may not literally ask, “What is the economy?” but that doesn’t mean they’re unaware. They see people buy and sell goods, in person or online. They likely have heard adults talking about the economy being good or bad. So, what do children actually need to know about the national or global economy?

Try starting with the basics: Money itself isn’t good or bad. Money is something we earn for doing work and can use to purchase goods or services. This could potentially lead to a bigger discussion of the roles of buyer and seller in our economy. As you explain bigger concepts, try to use tangible examples that your child will be able to understand.

You say: The economy is all about money: how it’s spent, where it’s saved up and how it flows around from person to person. There are buyers and sellers in our economy, and we can be in either role at any given time.

Buyers have money that they exchange for a good or service. When Dad buys you new school clothes, our family is the buyer. You need clothes for school, so I earn money at work and use some of that money to buy your clothes. I give the money to the store, which is the seller.
Now let’s say you have clothes from last year that you don’t use. You could become a seller and trade your used clothes in for money at a resale shop. Or sell them to another family that needs clothes for their child. (Don’t forget, donation is also an option if you don’t need the money!)

More Advanced Concepts for Older Kids

Another important aspect of the economy is supply and demand, which typically determines how prices are set. You could start to explain this concept to your child by asking them what is something they’d like to buy, but don’t have the money for. Let’s say your daughter answers “Bluetooth headphones.” You look a pair up online and they cost $55.

You say: Right now, you could buy these headphones for $55. But let’s say a new album by Harry Styles comes out and everyone rushes out to buy headphones so they can listen to him. They REALLY want the headphones, and soon there are hardly any left on the shelf.

Now, the seller knows how popular the headphones are. So, the seller raises the price to $75, because he knows his supply of headphones is low, but the desire (i.e. the demand) for them is high. People pay the $75 to get the headphones now rather than wait.

This is the law of supply and demand. If there are 500 pairs of headphones in stock at a store, that’s a big supply, which means your demand for them is low. So the price is low. You know you can get them at any time so you’re not in any big rush. But if there’s only one pair on the shelf and all your friends want them too, the demand is high and the supply is low. So the seller can charge more, because he knows lots of people want them but there’s only one pair left.

Why Isn’t Mom at Work?

Unemployment is one of the most frightening experiences that a family can go through. So, it’s no surprise that many parents try to hide or downplay the effects of a job loss so that their kids will remain blissfully unaware of the reality. Unfortunately, that’s not as easy as it seems. Toddlers can sense that something is terribly wrong even if they’re not sure what it is, according to an article in Parents magazine.

While you don’t have to go into details, it is important that your kids understand that something has changed. This is a sit-down conversation. It doesn’t have to be scary, but it should be authentic.

Let your children know that Mom and/or Dad has been laid off.
Explain what this means, and that it isn’t anyone’s fault. This isn’t a time for blame or pointing fingers, it’s just a result of the economy not being as strong as we’d like.
Explain how this will affect your family, and how everyone is going to do their part to help. Ask your son or daughter what expenses they could cut down on to help the family. Allowing children to make choices about how the family spends money can help them feel empowered rather than restricted.
Turn the negatives into a positive. This could be a great time for simple, free family activities.

Even if there are no unemployment issues in your household, chances are good that jobs in your community have been affected by the COVID-19 pandemic. Times of hardship like these create a teachable moment for you to address why it’s important to help others.

Your child may have friends whose parents have lost their job. Or, there may be others in your family or neighborhood dealing with joblessness. Take this opportunity to discuss having empathy and being able to see things from another person’s point of view. Then, look for ways that your family could help.

Could your children help prepare meals for neighbors in need? Is your family able to donate money to a food bank or shelter, or perform a virtual Random Act of Kindness? Find something your family can do together to share in the joy of helping others.

Learning for Their Future

Times of financial hardship create many challenges. But they also create opportunities to teach the children in your family more about the economy, the buyer-seller relationship and how your family can give back to others in need. If your kids are younger, focus on explaining basic concepts and using examples from their own experience. If your children are school-age, you can go into more explanation of economic events and specifics of how the family’s finances are affected by them.

Remember, one of your jobs as a parent is to help prepare your children to be responsible adults. With a little economic knowledge under their belt, your little ones will be ready to manage their finances in the real world when that day comes!