If you thought the "birds and the bees" talk with your children was uncomfortable, get ready to breach the next topic that requires frank, honest communication: We're talking the "goods and the green.”
While the extents will vary, most families will have to scale back and modify their spending habits, which could affect children.
“It’s important that kids understand that your family has financial limits,” says Brette Sember, author of the forthcoming The Everything Kids’ Money Book: Earn it, save it, and watch it grow! “If your financial situation has changed, children who are elementary age can be told that ‘Dad lost his job or Mom is making less money and therefore we need to make some changes.’
“Kids need to understand that money must be earned and spent carefully,” says Sember. “[Parents] should never spend more than they earn and should always save a portion,” to provide examples to children.
Parents should present a plan to not necessarily resolve the economic turmoil the family faces, but ideas on how to manage it effectively. Times like this are an opportunity to present valuable money lessons to children, according to Sember.
EXPLAIN THE TERMS
Define credit and the credit crisis, says Liz Pulliam Weston, author of Easy Money: How to Simplify Your Finances and Get What You Want out of Life. “Maybe not for a five or six year old, but older children should be informed of [some of the technicalities of the crisis].” Savings should also be addressed, along with budgeting and the concept of living beyond one’s means. And these lessons should be presented and also pursued! (Talking is not enough.)
