Explaining financial struggles to your child

Many families may not have the financial means to enroll their children in summer activities or after-school extracurriculars this year, but parents can reassure their children about their spending habits while also teaching them important budgeting and savings lessons. A Baylor College of Medicine expert provides tips on how to teach children about finances while suggesting budget-friendly activities for the rest of the summer and the upcoming school year.

“It’s important to give an optimistic but honest appraisal of budgets,” said Dr. Eric Storch, professor and vice chair in the Menninger Department of Psychiatry and Behavioral Sciences at Baylor. “If you’re not in a position to spend on camps and extracurriculars, be confident, reassuring and also direct about what you’re spending.”
 
He recommends demonstrating this for younger children by using prompts such as tokens, buttons or lima beans to discuss what items cost. Create a game-like environment to show them that purchasing things costs money. Certain games can also effectively teach older children lessons about money.
 
Similarly, have age-appropriate conversations about the importance of saving, explaining that money that comes in should ideally be greater than the amount you spend.
 
Budget-friendly activities teach children to learn how to entertain themselves, and parents can simultaneously teach their children an important skillset. For example, instead of putting change from the grocery store back in your wallet, put some or all of it into a jar and keep doing it on a regular basis to save. As children get older, parents can teach them about a checking account and what it means to have money coming in versus money going out of the account.
 
“We’re almost conditioned to think fun is related to spending money, but there is so much we can do that is free or with minimal cost,” Storch said. “At the same time, parents can teach kids about effectively managing a budget, teaching them that it’s not always possible to have everything they want.”
 
While many activities for children cost money, parents can provide entertainment without spending:

• Play a family game of kickball, soccer, wiffleball or volleyball
• Go on a walk
• Go to a park with family and friends
• Go to a community pool or other community setting
• Have a picnic
• Arrange playdates that are home-based
• Hold family game night

These low-cost activities not only allow children to be active, but also bring families closer.
 
Children might show signs of anxiety surrounding finances, including:

• Holding back on asking to make a purchase within reason
• Collecting or maintaining their possessions because they worry about not having enough or may need it at another point in the future
• Feeling nervous or experiencing stomach aches or other somatic symptoms
• Seeking reassurance, talking about money often or asking if you have enough money

“Kids discern things and they are attuned to their environment – often more than we give them credit for. Provide an optimistic but realistic outlook and reassure them that the family has a good plan for managing finances,” Storch said. “There are numerous resources for parents to perfect their budgeting and saving skills, such as NerdWallet. Consider these resources to help with budgeting and saving.”