How to break bad financial news to your kids

How to break bad financial news to your kids

As back-to-school time approaches, your kids return to playground gossip—and the stories they tell may be similar to last year. Whose dad got laid off? Who got new sneakers and who’s still wearing their old ones? Who went to summer camp or on vacation and who didn’t? The unemployment rate hasn’t changed much from May (9.7%) ’til now (9.5%), so chances are, neither have family situations.

These conversations—or money issues in your house—may make your child feel concerned. But how your child reacts depends on how you approached family finances or broke bad news to your child. See how to approach children of any age:

Kids: It may be tempting to hide bad news, but don’t. “If there’s a feeling of it in the air, they will sense it,” says Carolyn Meyer-Wartels, a psychotherapist and parenting educator in New York. “Overhearing the news, or hearing about it secondhand, is far more anxiety-producing than actually getting the truth.” Although it seems irrational, kids often feel like they’ve caused an event like a divorce or layoff. Explain that it’s not their fault. Reassure them that even though part of your life has changed, they’ll still have all the things they need—food, home, and family.

Tweens: At this age, kids understand that not all families have the same finances. They compare toys and clothes with their friends, and peer pressure takes hold. If financial straits have temporarily deprived your kids of video games or cool sneakers, acknowledge their disappointment, but no need to fret constantly, says Jill Norvilitis, a psychology professor at Buffalo State College who specializes in children’s emotional development and the psychology of debt. Their awareness of the recession—and the fact that some of their friends’ parents may have lost jobs—can make the loss a bit easier to accept. Plus, when you’re 12 you don’t want to be different, so it may help to talk about people who are in the same boat.

Teens: Teens have a lot more options when it comes to earning income to support their lifestyles or, in especially serious circumstances, the family. If your teen can get a job to pay for incidentals, it can take pressure off the situation. But with teen joblessness at its highest since World War II, this may not be an option. Consider “hiring” your teen for various gigs like babysitting or running errands. If your teen is asking questions, put together a family budget so he or she can see the big picture. And, perhaps most important, be sure to have a frank discussion about college costs and what your family can afford, so there are no surprises.

Young adults: You’re going to be a financial role model (and open wallet) for your kids long after they turn 18. According to a recent Charles Schwab survey, 41% of parents provide at least some financial support to their adult kids. And many more 20-somethings are moving back home, which could be a bonus if they contribute to rent or bills—or a drag if they don’t. “It’s wonderful for parents to help children when they have real economic hardship, but often these older kids have a sense of entitlement that doesn’t stop,” says financial planner Denise Smith. If you have debt or need to save for retirement, tell your kids that you’re sorry you can’t help them more, but you need to focus on your own financial needs. You’ll be less of a burden to them later in life if you secure your own future now.

For more tips on each age, see the article I wrote for CBS Moneywatch.

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