Now is the best time to talk to your kids about money. Here's how.

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Hanna Horvath, CFP®

Hanna Horvath, CFP®

Managing Editor & Certified Financial Planner™

Hanna Horvath, CFP®, is a certified financial planner and former managing editor at Policygenius. Her work has also been featured in NBC News, Business Insider, Inc. Magazine, CNBC, Best Company, and HerMoney.

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The pandemic has likely affected your finances in some way, and those changes can impact the entire family. Living a new normal may be confusing for your children, who might not fully understand what’s going on.

Get your kids actively involved in — and more confident about — your family's fiannces by talking to them about the money changes happening in your household.

“There are so many changes going on right now, with the pandemic, and job losses and everything else,” said Rob Bertman, founder of the Family Budget Expert. “But that doesn’t mean you should pretend like everything is normal, especially when it comes to money.”

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Why talk about money right now?

Maybe a member of your household recently lost their job, or your budget has gotten tighter. Maybe your discretionary spending has gone down and you want to save more. Or maybe you’ve decided now is a good time to make a life change — like a move to a new place — and want to convey that to your child.

If your life is changing, involve your kids in the family discussion. They likely have concerns of their own.

“Your older children may be worried if their parents’ income has dropped or how secure financially they are,” said Susan Newman, social psychologist and author of “The Book of No.” “For younger children, it’s more of a material worry than an actual worry about lifestyle and living arrangement. They may want to know why they can’t have a particular item now, like a new iPad or the new cell phone.”

Be honest

Prepare by picking the right time and setting for a money conversation. It can be difficult to to shield your child from what’s going on in the news, especially when bad news these days comes in abundance. But you’ll want to reassure them and “make them feel loved and secure,” said Newman.

Be upfront about what’s going on with your family financially, but keep the conversation age-appropriate. Young children may not grasp certain financial concepts, but kids of all ages will respond to open, honest communication.

Bertman outlines five phases of financial understanding for kids. You can use stories, games or examples to illustrate these concepts:

  1. Money exists and things cost money.

  2. Money is finite.

  3. We have to make choices with money.

  4. Just because you want to buy something right now doesn’t mean you should.

  5. Money comes from work.

“I think once your child has a basic understanding of these concepts, it’s fairly simple to explain what’s going on with your finances,” said Bertman. “But it’s really important for the parent to stay calm and understand their kids’ concerns, but explain how it impacts their lives and the stuff they enjoy doing.”

Learn to say no — gently

If money needs to be limited, you’ll have to learn to start saying no.

“Parents are typically pretty indulgent with their kids,” said Newman. “Now is not the time. The pandemic gives parents the perfect opportunity to say ‘no’ and teach their kids to cope with disappointment, that they can’t always have everything they want.”

Avoid fear mongering. Phrases like “we can’t afford that” may cause anxiety in kids. Instead, frame money decisions like a “choice,” said Bertman.

“Try something like, ‘Money’s more limited now. We have to make different choices,’” he said. “Like, ‘Instead of going out to dinner a couple times a week, we’re choosing to pay our air conditioning bill.’”

Make your finances a collaborative process. Kids will often rethink their purchases when it’s “their” money instead of their “parents” money, said Newman. Frame your language to include ‘us’ and ‘we’ instead of ‘you’ and ‘I’.

Setting a good example

Your children may want to be involved in the financial process. Let them help create a household budget, or donate money to charity. Parents can be very influential when it comes to finances, and teaching your children to be charitable is one of the best lessons you can offer, said Newman.

Kids learn by example. Sticking to positive financial habits not only help you stay on track — it can help your children build life skills.

“Parents are often hesitant to talk about money with their kids, but their kids can usually figure out what’s going on,” said Newman. “It’s also about what you do, what you say and how flamboyant or conservative you are about money. Those are subtle lessons your children are picking up.”

Learning about money doesn’t have to be boring or exhausting — in fact, it’s easy to build lessons into your daily life. Use your time in quarantine to try out free and fun family pastimes, like board games or arts and crafts. Take a day-to-day activity and make it into a learning moment, like building a grocery budget before going to the store, said Bertman.

“It’s okay to acknowledge that things are weird and different right now,” he said. “But is bringing everyone together right now. It’s a really great opportunity to unite the family together.”

Want some fun and easy ways to teach your kids about money? We’ve got a list.

Image: Ralph Hopewell Anderson

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