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Money talk – tips for having tough financial conversations with your kids

02 Dec 2020

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Many Kiwi families have experienced changes to their financial situation this year, as the economic impact of COVID-19 has seen many affected by reduced hours, pay-cuts and (in some cases) job losses.

In fact, findings from our second annual State of the Nation Parenting Survey showed that 42% of parents had seen their financial situation worsen as a result of COVID-19, including 10% who said it had gotten a lot worse.

Finances can feel like a taboo topic, and our survey findings also showed some parents felt it was inappropriate to discuss a change in financial situation openly as a family, for fear of causing children concern – or would only do so when explicitly asked, or if changes to spending habits (essential or discretionary) made it absolutely necessary.

For those whose financial situation has changed for the worse this year, it can be tough to find the right way to talk to children about what that means for the family – particularly if occasions like Christmas and birthdays are going to look a little different as a result.

Any parent preparing to have this sort of conversation should keep the following tips in mind:

Be open, but keep it age appropriate

When it comes to building smart financial habits in children, one of the best things parents can do is to start talking about money from an early age.

Watching parents navigate a changing financial situation can be an invaluable learning opportunity, so having open conversations is important, but so is gauging the level of detail that’s appropriate for different children. A 10-year-old doesn’t need to be across the same detail as an 18-year-old, and some children may handle “bad” news better than others. Trust yourself to know what’s right for your child.

Remember, even if they’re not asking questions, children may be more aware than you think. If they sense there’s a problem that’s not being talked about, there’s a risk their imagination could take over and they’ll start to fear the worst (particularly with little ones).

Showcase resilience

It’s particularly important to be mindful of the tone and language you’re using when having tricky financial conversations with your kids.

Be honest and realistic, acknowledging that the next few months might be a little tougher than the family is used to, and certain sacrifices will have to be made – but avoid catastrophising, or talking about the possible worst case scenario.

It’s important to reinforce that the family will be fine – there will still be a roof over their head and food to eat, and you will get through these changes together. Demonstrating resilience in this way can help ensure children don’t come away from the conversation feeling stressed or concerned.

Encourage a two-way conversation

Chances are your kids will have a few questions, but if money isn’t something that you’ve talked about openly as a family before, they may be a little unsure about whether it’s okay to ask them. Encourage questions, and don’t worry if you don’t have all the answers. What’s most important is just reassuring them that you’re working through the details.

You might also find children will want to offer up their own ideas for how to reduce household expenses, or generate a little bit of extra income. Give them the chance to do so by asking for their suggestions – and don’t be dismissive of any of their ideas.

Focus on time, not money

Changing financial situations will mean some families have to take a slightly different approach to Christmas and birthdays for the next few months.

Rather than worrying about spending money on lots of material gifts, ask your children for a list of activities they’d like to do as a family – baking, a board games night, camping in the backyard – and use those to create opportunities to spend quality time together instead.

For older children, try giving them something to work towards in the longer term, such as “We’re going to have to make a few compromises for Christmas this year, but let’s all work towards having a great family holiday together next year instead”. What that family holiday looks like can be determined by your financial situation at that point in time.