This is a guest post from Neal Frankle, CFP, who blogs over at Wealth Pilgrim
Like everyone, my income and financial situation has been “impacted” by the current economic crisis. And as you can imagine, the “impact” hasn’t been pleasant.
We’re not at risk of losing our home or business (thank G-d) but our lifestyle has changed. We’ve reduced our monthly spending and we’ve eliminated our vacation plans. Even though we’ve saved for our childrens’ college since the day they were born, those investments have been clobbered. We’ve looked into different alternatives for our daughter who is about ready to start college this September.
We’ve been under stress like everyone else. But my wife and I decided that we’d do our best not to bring that negative energy into our home. We didn’t talk about it in front of our children if we could avoid it. This was a mistake. A big one.
We found out that the kids know what’s going on ““ and they’re afraid. All their friends are talking about the financial crises anyway. By failing to discuss these issues with our kids head on, we only intensified their fears. We deprive them of the opportunity to learn an important lesson and to put their fears into perspective.
My 9 year old finally came to me after seeing a particularly scary story about the economy and asked me if I was going to lose my job like her friend’s dad did. She looked frightened.
I decided to talk to all my children about what was going on, what happened and what it means to us as a family. When I was done, my 9 year old looked up at me and simply asked,” Daddy, why didn’t you explain this to us before?” I didn’t have an answer.
Don’t make the same mistake I made. Use the current financial crises to educate your kids and allay their fears.
1. Explain what is going on but keep it simple.
Talk about the reality that many people are going to have to find new homes and new jobs. Most of them will.
2. Tell them why it happened.
I don’t suggest you take your kids through your old college economics text books, but I do think it would make sense to talk about people spending too much and investing poorly.
3. Tell them what this situation will mean to you and your family.
If you might have to move tell them so they don’t worry about being homeless.
If you may lose your job, tell them about your plan to find a new one.
At first it was tough to have this conversation with my kids but once it was done, I was glad I did it.
My 9 year old was fine with everything. My 17 year-old had a different reaction. At first she was upset by the fact that we had to consider alternatives to the Ivy League colleges she wanted to attend. After awhile, she understood the situation and before my eyes, she seemed to mature. The payoff for us as a family is that the kids finally got it ““ money really doesn’t grow on trees. They understand that money is powerful if used well and destructive if used poorly. (I only wish the folks in Washington and Manhattan got that message).
Have you talked to your kids about the current financial crises? What did you discuss? Were you surprised by the way the conversation turned out?