How to Talk to Your Kids about Money Problems

Reading time: 4 minutes

If your family is facing a major financial challenge, you may decide you want to discuss the issue with your children. How you start the conversation, and how much you decide to share, will depend on the problem you’re handling and the age of maturity of your children. However, going into the talk prepared can help you turn a potentially stressful situation into a potential learning experience for your family. 

It can be tough to have a conversation with your kids when you don’t have all the answers, but if they’re going to be affected by your financial situation, you may as well address the problem directly and answer what questions you can. Going into the talk prepared can turn a potentially stressful situation into an important learning experience.

Fully understand the scope of the problem before explaining it to your kids

Your first step toward addressing a money issue with your children is to understand the problem yourself. If all you know is you never have enough money at the end of the month, you won’t have much to say when your kids ask questions.

Be able to explain the problem as clearly as possible. If you’re dealing with a sudden job loss, for example, be able to walk them through how you’re going to file for unemployment and look for new work. If the problem involves a debt, be prepared to explain how that debt was established, be that your home mortgage, student loans, medical bills or other expenses. You don’t have to give your kids this information all at once, but it’s good to have answers on hand if they start asking for details about the situation.

Be ready to talk about how the issue will impact the children. Is money tight at home? Maybe they’ll no longer receive an allowance or have to forgo some of the activities they enjoy. Or you could be explaining something more serious, like an upcoming move because you can no longer afford your current residence.

Make your kids feel comfortable and included

The way you talk about your finances with your kids will affect how they think about money as they age, and that’s why it’s so important to be forthcoming about financial problems and calm about finding solutions.

Adjust the tone of the conversation to fit your child’s age and their experience with money. Kids under the age of 10, for example, may have trouble grasping certain concepts, so you may need to simplify the information you give them. You might need to explain what a budget is or how debts accrue before you can talk about how your circumstances will affect them. Older kids, on the other hand, are more likely to understand the situation but also may ask additional questions you’ll need to be prepared to answer.

You don’t have to disclose everything

Money problems can come hand in hand with feelings of guilt or shame. You may not feel comfortable disclosing everything about your finances to your kids and, depending on their age, it may be better not to. Focus on what they need to know; then decide whether you want to go more in-depth. Give yourself permission to revisit the conversation if you determine they need to know more about the situation down the road.

The most important things to explain are what could happen to them directly and why those changes are occurring.

Talk about what happens next

When you’re breaking tough news to your children about the family’s finances, offering a solution or next step can give your kids a sense of control. That might mean having a list of ideas for replacing their allowance with other fun — but more thrifty — activities or just being able to provide them with a few details about what happens next.

Set a new budget with them so they can learn about money management, talk about the new neighborhood or town the family could be moving to, or just explain what a credit card is, how it works and where you ran into problems with debt. This way they’ll get direct knowledge of how important healthy money habits are, and they’ll feel more involved as you work through your current financial situation.

It’s normal to feel unsure about talking money with your kids, but it’s better to be up front about situations that will affect them. Most kids can provide much-needed support and understanding. Depending on their age and their grasp of the circumstances, they may even be able to help you weigh your options. No matter the family dynamics, the first step is to talk openly with your kids and answer any questions they have.