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Money Management Advice From My 9 Year Old.

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?

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Comments (5)

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  1. Miranda says:

    Great advice! As always, sensitive issues like this should not be avoided in the home. Kids are going to hear about it elsewhere, and it is much better if they hear about it — especially with regard to your individual situation — from you. We’ve been talking to our 6-year-old a little bit about saving more and cutting back expenses so that we won’t be as affected if something happens down the road. He’s been thinking more about what he wants to do with his allowance money as a result.

  2. Rob Willis says:

    Great article Neal. As parents it is our responsibility to help our children understand what is going on in the world today. We need to help them adjust their attitude towards money, and let them know that even more so in these tough economic times, we have to be responsible for our money, and help them to understand that they must learn to save and spend their money wisely and not give in to impulse buying.

  3. As a younger man, I was always under the impression that I would never have to worry because my father owned a small business. He always made it seem that everything was downhill. When I was in High School, he would hint at things to me, almost half-whispered, that things were going to get tough. So I stopped using the gas card, and cut back on any extra things that cost him money. Finally, it dawned on me that he was losing his business. I went from having college paid for, to not having a clue what to do. I didn’t go to college immediately after high school. I worked for one year, and realized I needed to get my butt to school. So, I got in my car one day and headed over to the tuition office at the local community college and got my first loan for school. Boy, let me tell you…when you are paying for it…it means a LOT more. Because I didn’t jump right into a big 4 yr university, I was able to skip the party scene, maintain a 4.0 GPA and get into an even better school than I would have with my dad’s money. I am more appreciative of what he did for me growing up, than I probably would have been if I would have rode the wave of daddies money. I believe, when a father and a child experience a situation like that together, it creates a new type of relationship. Almost a partnership. Call me crazy, but I believe that this economy will bring you and your family closer than ever. I know what the hard times did for me. Best of luck. Really enjoy reading your stuff.

    Joe

  4. Neal Frankle says:

    Thanks Joe. I had a similar experience growing up. My daughters have had it pretty easy for the last 18 years and now we are being very honest about what we can and can not do. It is, as you thought, bringing us closer.

    Thanks. I really appreciate your sharing.

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