How to tell your kids that you can’t afford it

Most everyone is being impacted by today’s economic environment—even children. While they might not be losing sleep over shrinking retirement plans and decreasing home values, they are (perhaps for the first time) facing the reality that money doesn’t grow on trees. So how do you tell your son that he can’t have an extravagant birthday party this year or your daughter that she will have to take a break from dance lessons? How will you tell your children that this holiday season will have to be leaner?

Start by examining your own attitudes about money. This is extremely important because children learn more from what they see than from what they are told. You can tell your kids that times are tight, but it won’t do any good if they see that you waste money.

Next, communicate openly with kids about money, in simple terms that they can comprehend. While a young child won’t understand economic issues at the complex level of an adult, they can learn about the basic benefits of budgeting and saving money.

Teach your children about the difference between wants and needs. (Note: Try to do this before they are throwing themselves on the floor of the Target toy aisle.) Make sure that they understand that we can live without things like candy and trips to the movies. This exercise may seem elementary, but it surprises me how few adults truly know the difference between a want and a need.

Brainstorm alternatives to spending money. Make an adventure out of discovering no-cost family fun, such as taking a walk in the park. Don’t forget to talk about all the ways your family is fortunate. After all, one secret of financial success is to appreciate the things that you already have (so dust off those old forgotten favorite toys!)

Let them be part of the solution by involving them with your day-to-day personal finance decisions, such as grocery shopping. Have them help you with the grocery list and show them how to comparison shop, pointing out how much money you save through comparing prices and using coupons.

Let older children sit with you while you pay the bills, so they can see how much all the monthly obligations, like utilities, phone bills, the mortgage, and insurance, add up to. By showing them the details you take into consideration, you’ll be teaching them how to be a wise consumer.

Finally, don’t feel bad about having to say no. Sheltering children from life’s financial challenges will only cost them in the long run. Consider this an ideal opportunity for them to learn a valuable life skill.

I’d love to hear how you are helping your child understand that times are tough. You can also jump in on the discussion taking place on

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

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