Talking to Young Kids About the Financial Crisis

The current economic situation can provide a teaching moment. But it's important to keep your discussion reassuring -- and age-appropriate.

Last week I called my son, the college sophomore, and asked if the financial crisis was topic A in his economics class. "Not really," said Peter. "We have a test coming up so we're covering the material in class."

Aargh! With all due respect to the diligence of Peter's teacher, it seems to me that he's passing up a prime teachable moment -- certainly for high-school and college students -- to discuss how we got into the current predicament and how we might get out of it.

For younger children, things are a bit trickier. I've received a number of calls from reporters asking whether parents should discuss the financial crisis with their kids -- and, if so, what they should tell them. The answer to the first question is a qualified yes. As to the second, it all depends on the child's age.

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What younger children crave most is reassurance. Here are six ways parents can provide it:

1. Remember that little pitchers really do have big ears. Even if you don't discuss the situation with kids directly, they can sense that something is up, especially if you're worried about your own finances or that you might lose your job. If you ignore the situation, kids may imagine it's worse than it really is.

2. Children live in a black-and-white world and take you literally. Don't resort to dark humor about going broke or ending up in the poorhouse. They may not know what a poorhouse is, but they'll figure it can't be good -- and next thing you know you'll be camped out in a box in the street.

3. Turn off the TV and tune out the talking heads. It's one thing to be well informed, but exposing your kids (and yourself) to a steady stream of hyped-up headlines and downbeat news is bad for your psyche.

4. A little honesty goes a long way. Kids don't want or need to know all the details of your balance sheet. They just want to know that, hard times or no, they will have a roof over their heads and food on the table -- and that things will get better.

5. Have a plan. If you've lost your job, for example, or anticipate that you might, tell the kids how you'll go about looking for a new one.

Meanwhile, let them know that you'll be able to collect unemployment benefits, or that your spouse will go back to work or bump up his or her hours to tide you over.

6. Encourage the kids to pitch in. Let them know up front that their holiday wish lists will have to be shorter this year. They'll be happy to do their bit for the family.

And look on the bright side: This may be your chance to think creatively about cutting back on holiday overload -- something that might be desirable even without a fiscal crisis.

SEE ALSO: Tips for talking to teens

Janet Bodnar

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.