Should parents discuss the financial crisis with their children—and, if so, what should they tell them? The answer to the first question is a qualified yes; the second answer depends on the child’s age.
What younger children need most is reassurance. Older kids can process more information both in school and at home—though getting the details straight sometimes presents challenges of its own.
I recently listened in on a high-school economics class in which the teacher asked what had caused the current crisis. “Corporate greed,” piped up one student.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
It would have been nice if the teacher had gone on to explain (or had the kids explain) that corporate greed had been aided and abetted by the Federal Reserve keeping interest rates low; Congress urging Fannie Mae and Freddie Mac to buy up dodgy mortgages that lenders didn’t want to hold; and consumers borrowing easy money to buy homes they couldn’t afford.
Taking advantage of this teachable moment doesn’t have to be limited to AP economics. In history class, students could discuss how the current situation differs from the 1930s and how the Fed has been greasing the skids with credit in order to avoid the mistakes of the Great Depression, when government sucked money out of the system.
Middle-school teachers could inject financial literacy into social studies by explaining how borrowers overextended themselves on mortgages and credit-card debt. And in math, students could use a compounding calculator to learn how it pays for young people to buy stocks at today’s fire-sale prices.
At home, too, parents can use the following strategies to reassure teenagers while giving them a lesson in managing money:
- Be proactive. You don’t have to share every detail of your family’s finances. But if you need to reduce your spending because of a layoff or because you want to pay off debt, show your kids how your monthly expenses stack up with your income and how you plan to cut back. That puts your finances in context without overloading the kids with information.
- Have a plan that teens can participate in. Perhaps they can cover more of their own expenses by taking on more babysitting gigs or mowing more lawns. If paying college bills is an issue, have an up-front discussion about what you can afford. Should they limit their applications to lower-priced in-state schools? How much does it make sense to borrow based on their potential future income?By the way, if your kids are already in school and you’re suddenly short of cash, you have options. Appeal your financial award if you’ve lost a job, or take out a federal PLUS loan if your home equity line has been frozen.
- Be positive and add perspective. Teens and young adults have never experienced a serious economic downturn. They need to know that our resilient economy has always recovered from other crises, and this too shall pass.
SEE ALSO: Tips for talking to young children
-
Don’t Forget to Update Beneficiaries After a Gray DivorceSome states automatically revoke a former spouse as a beneficiary on some accounts. Waivers can be used, too. Best not to leave it up to your state, though.
-
What’s the Difference Between a CPA and a Tax Planner?CPAs do the important number crunching for tax preparation and filing, but tax planners look at the big picture and come up with tax-saving strategies.
-
How to Motivate Kids to Savepersonal finance It's not easy teaching your child to save. Here are some ways readers have incentivized their kids to keep track of their finances.
-
Lessons for Kids From the Crisissavings One of the greatest opportunities presented by the pandemic is to give children an appreciation for the workings of the economy.
-
Why Financial Education Workscollege Money skills learned young will pay off in the long run.
-
The Tooth Fairy Is Leaving Less Under Pillows These Dayssavings The average amount that the Tooth Fairy gives kids is down 10% from last year.
-
The Value Test: 300 Colleges That Pass
College Rankings All the schools on our list, from 1 to 300, are best values.
-
6 Ways to Get Your Kids to Do Chores Without Paying Themspending Kids shouldn't be paid for doing routine tasks, but for doing extra jobs that parents define as above and beyond.
-
Save $1 for College, Cut $2 in Debt
college Paying for college doesn't mean you have to take out thousands in student loans.
-
Back-to-School Money Tips for College Students
college Kiplinger's summer 2015 interns offer advice on managing your finances as a student.
