How to talk to your kids about money when times are tough


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Inflation at 7.8%. Reserve Bank raising interest rates ten times in a row - despite saying it wouldn't raise them before 2024. Petrol prices up. And despite a lack of professional skills in some areas, continued disruption in the job market especially in tech jobs amidst fears of a depression.


It is affecting us all. How, then, do we talk to our kids about finances?  How do we have honest discussions with them about why they can't put their favourite treat in the shopping trolly, continue attending a private school with their friends, or why Christmas at the coast is cancelled?

how to talk to your kids about money when times are tough

With younger children, it can be easy as they don't have a developed concept of money. What they need is love and laughter, and that's not something you can buy. (Although being financially stable certainly reduces stress and anxiety.)

When I split from my ex-husband and became suddenly single, my kids were too young to understand that it meant a change in lifestyle. They didn't mind eating frugal food (hello roast chicken repurposed four ways), and an exciting day out was a trip to the local park to feed ducks (sweet corn, not bread in accordance with local laws).

For the first two years after my separation, I would rewrap birthday presents at Christmas - and they never noticed. And thanks to the generosity of friends and Buy Nothing, I dressed them sustainability in second-hand clothes. (Who am I kidding: I still do that.)

But for older kids, when there is a change in a family's financial situation - especially where it happens suddenly due to a relationship breakdown, loss of a job or business change of fortune - it can be much harder.

High school-age kids in particular are sensitive about fitting in, and often want to wear the right brands so that they can be part of the in crowd. Not being able to socialise with their friends due to fiscal constraints, or being picked on for being 'povie', isn't fun.

How to deal with this?  There's one word: honesty. You need to have honest conversations with your kids about what is happening with finances in the family. And honestly, they've probably noticed anyway. If stressing about your supermarket spend hasn't been a giveaway, they may have seen you look anxious when bills came in or have overheard conversations at night.

According to the author of On Your Own Two Feet: The Essential Guide to Financial Independence for All Women, financial planner Helen Baker, when couples go through money troubles, including after separation, often parents feel there's a sense of obligation to keep everything the same. This includes keeping kids at the same school, doing the same sports and continuing to wear the same shoes that are on trend. But Baker warns this can be dangerous.

"But you are actually sending a strong message about how you manage money," she says. "You actually need to help your children understand the changed reality and say to them, okay, there were two incomes and now we're down to one. Or this has happened. This is all we can afford. Now we make some choices."

Connection versus stuff

Baker says through her experience of working with clients who have children, she has observed that the most important thing is for parents to spend time with their children. Buying 'stuff' is less important. In divorce situations she often sees parents shower expensive treats on their children in a battle for their hearts, a phenomenon she terms Disney Dads.

"Spend time with your kids rather than give them stuff," she advises. "Help them understand that this is what it was like before - but things have changed. And by doing that you are actually teaching them about how to manage money."

Baker believes that if you don't do this, you are actually setting your kids up for failure. "Otherwise, down the track, these are the kids that will have unreal expectations about housing. They will have massive credit card debts. They will have all these problems because they're not used to having an understanding of how your financial situation can change," she says.

"Whether you keep your job, lose your job, get sick, get divorced or something else happens, it's a prime opportunity to reset values, educate your children about money, and help them understand that just as much as they want to spend time with you, want to spend time with them.

"And you need to be realistic about your financial situation or the downside is who's going to be there to support you down the track when there's not enough."

All in this together

Financial disruption can affect families hard. Arguments over money are a common reason for divorce.

But it's important to work together during times of financial hardship. Being honest with your kids about what is going on is a start. And you can also ask them for help.

Maybe it's their understanding that you need to move somewhere that isn't as nice as before. Maybe you need them to help more with housework so that you can take up a second job. Or maybe you need to support them to start working so that they can afford the expensive designer shoes they want.

And your kids might just surprise you by rising to the challenge.

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Serina Bird is a proud frugalista who has amassed more than a million dollars through frugal living. She is the author of several books including The Joyful Frugalista and The Joyful Startup Guide. Serina blogs at The Joyful Frugalista, and her podcast is available on Spotify and Apple Podcasts. She is also the founder of The Joyful Business Club. Her new book, How To Pay Your Mortgage Off in 10 Years is out now!
Irene Tsang
March 11, 2023 5.24pm

I cannot agree with you more, and appreciate what you are saying here. Children needs to learn how to deal with the reality, how to manage finance in different situations. I never give/buy my daughter anything which is not essential since I separated my husband when my daughter only three years old. My daughter learned to use second hand is not a sin, it is good for your pocket and the environment. Only buy when you need and not what you want made me afford to put extra money in my superfund. I am going 70 this year and I am still proud of what I achieved.