Let’s Talk to Our Kids About Money, Even When Times Are Tough

Dear Readers,

With so many families around the country facing financial challenges as a result of the COVID-19 pandemic, I’d like to devote this column to discussing ways that we, as parents, can best help our kids through these challenging times.

One of the most insidious parts of this pandemic is that it has undermined our sense of personal safety. For millions of Americans, the toll of medical, emotional, and financial stress is piling up. And it’s not just impacting adults; our kids, regardless of whether they're 5 or 15, are likely feeling the effect as well. And although I can’t offer a cure-all, I CAN offer one powerful remedy: TALK.

Trust me, I know talking about money can be hard. We assign all sorts of values to money—whether that’s success, love, security, or even self-worth. Many of us come with our own baggage, which can further complicate things.

But the good news is that once you understand and overcome these obstacles and are able to have open, honest, and nonjudgmental conversations about your finances, the resulting clarity and confidence can be powerful, both for you and for the rest of your family.

First get a handle on your finances—and your emotions

Before you start talking to your kids, it’s best to do some prep work on your own. If like so many Americans you're facing a reduced income, there are lots of positive steps you can take to manage your new situation.

Although your income may be reduced, it's possible some of your expenses have gone down as well. Or perhaps you have an opportunity to redirect money away from some nonessential extras to focus on higher priorities. As a short-term strategy, you may be able to reprioritize your bills, and take advantage of government benefits and programs that have been designed to assist families in need.

If you have a partner, make sure you’re both on the same page. Go over your budget together, and talk out any differences. It won’t help if you tell your kids one thing, and your partner has a different take.

My hope is that once you’ve gone through these steps and made a plan, you’ll start to feel a little better and a lot more in control. But be sure to address your feelings. In times like this it’s natural to feel frightened and anxious. And if you’re overly anxious, your children will pick up on it—and that can only make them fearful as well.

So take some time to talk through any stress with your partner, friends, or a trusted professional. And then, once you feel grounded, you’ll be in better shape to open up the conversations with your children.

Tailor your conversations to your kids' individual needs

This may sound obvious, but the kinds of conversations you have with your kids should depend on their age, developmental level, and personality. Some kids like details, others respond better to ideas or general thoughts. Some are more anxious than others. You know your kids better than anyone else, so work with that knowledge.

Offer up as much detail as you think appropriate

I’m always in favor of being honest. If your teen is responsible and wants to know how you’ll cover the rent, tell them. If it means you aren’t able to pay into their college fund for a few months, perhaps let them know. In fact, depending on your child, sharing your entire budget—explaining where you’re cutting back and why—could provide a valuable lesson in personal finance.

That said, as you share details, try to be reassuring. The message you want to send is that you’re in control. Even if your family needs to cut back for the time being, let your kids know that the situation isn’t permanent. Also emphasize that you’re not in this alone, that families across the country are making changes now to ensure a better future.

Be open to their questions

Money conversations should be a two-way street, between parents, between parent and child, and even between children. Make it really clear to your kids that you’re ready to answer their questions any time. If they’re worried about something, make sure they know you want to hear about it. And if you have a child who may be reluctant to speak up, you can start the conversation yourself.

However and whenever issues come up, take the time to sit down with your children and listen. Let them know you have all the time in the world for them—because at the end of the day, they are your highest priority, and they need to know that.

Share your priorities

Money management starts with a budget and then setting priorities. It’s never a good idea to spend mindlessly, but this may just be the perfect time to refocus on what’s most important to you, and make sure that’s where your money is going.

This type of prioritization can also be a valuable lesson for your kids. If you explain to them, for example, that you decided not to buy a new car because it’s more important to fund their education, that’s a powerful message. Or if you’re putting a major purchase on hold to help their grandparents pay their bills, that’s another important illustration of your values.

Look to a brighter future

Even though money may be tight now, help your children look to the future. If your young children get an allowance or get paid for chores, talk to them about saving it for future goals. Perhaps they want to buy a bike or save up for a special adventure. Older kids might want to save for a bigger goal like a new computer or music lessons. The point is that by looking beyond the current crisis, we also keep our spirits up, envisioning a brighter future.

There's no question that people all over the world are being tested in ways we never thought possible. My hope is that families and communities will find strength in themselves and each other, staying connected through many, many conversations—about their fears, their hopes, their joys, and yes, about money.

Have a personal finance question? Email us at askcarrie@schwab.com. Carrie cannot respond to questions directly, but your topic may be considered for a future article. For Schwab account questions and general inquiries, contact Schwab.