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Laura Rowley Money & Happiness

Laura Rowley, Money & Happiness

How to Talk to Your Kids About the Economic Crisis

by Laura Rowley

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Posted on Wednesday, October 22, 2008, 12:00AM

With doomsday financial scenarios screaming from the headlines and television, there's no question that kids will pick up on the anxiety in the air. Talking to them about what's happening in both the economy and the family budget is crucial -- because the less we say, the bigger they might imagine the monster in the closet to be. But what's the best broach to this loaded topic?

Needs vs. Wants

First, be conscious of the way you talk about money, and cut out the "poortalk," advises David Myers, professor at Michigan's Hope College and author of "The Pursuit of Happiness."

"‘I need that' can become ‘I want that.' ‘I am underpaid' can become ‘I spend more than I make,'" Myers writes. "And the most familiar middle-class lament, ‘We can't afford it,' can become, truthfully, ‘We choose to spend our money on other things.' For usually, we could afford it -- the snowmobile, the CD player, the Disney World vacation -- if we made it our top priority; we just have other priorities on which we choose to spend our limited incomes. The choice is ours. ‘I can't afford it' denies our choices, reducing us to self-pitying victims."

I've always tried to frame finances in terms of choices for my kids. For instance, my daughter came home from a play date once and asked when we would be getting an "extreme makeover" on our house, since compared to her friend's palatial digs we lived in a shack.

The Landscape Has Changed

I told her we were lucky not to have the disabling injuries, serious health problems, and other woes of the families on the "Extreme Makeover" TV show. Secondly, we could have a bigger home, but then Mom and Dad would have to get different jobs, leave early in the morning, and work late into the evening in New York City. (I work mostly from my home office.) And that would mean I couldn't drive them to school or have a snack with them when they arrive home, and we wouldn't be able to have dinner together as a family very often. Fortunately, she agreed that the tradeoff -- more time with us -- makes it worth having the smaller home. (Of course, she's not a teenager yet.)

This philosophy is ideal for tough economic times. Rather than scare kids -- "We can't buy anything because Dad lost his job and we have no money!" -- we can tell them that the economic environment has changed, and that we need to make different choices about our family budget for a while.

When we hide financial realities, and pretend life is seamless and effortless, we do both ourselves and our kids a disservice. "By keeping crises private, you prolong and intensify the pain and fear you're feeling," says Stephen Pollan, a New York consultant and author of "Lifelines for Money Misfortunes." "You have control here; you can ask for raise, get a new job, cut down on spending. Money is actually one of the only serious problems that is totally within your control."

Switching Focus

Enlist your kids' help: Ask them to be creative and think of half a dozen low-cost ways to have fun as a family, or ways to earn more, whether it's selling stuff on eBay, raking lawns, or babysitting. Asking kids to pitch in empowers them, because you're acknowledging that they're capable of making a difference.

Also put economic issues in global perspective. Lately, I've been doing that by renting foreign films from Netflix for family movie night. Movies like "Children of Heaven" -- in which a poor Iranian boy accidentally loses his sister's shoes, and they have to share his sneakers in a relay fashion -- help my kids appreciate the wealth they enjoy. Or check out "God Grew Tired of Us," a documentary about three Sudanese refugees who make their way to the U.S., and are astounded by luxuries like electricity, running water, and supermarkets (and genuinely puzzled by the relationship between Santa Claus and Christmas).

Perhaps the most important factor (and the one that requires the most discipline) is to be optimistic for kids, and focus on the good amid the tribulations. In "Learned Optimism: How to Change Your Mind and Your Life," University of Pennsylvania psychologist Martin Seligman explains that optimists view setbacks in their lives as temporary rather than permanent; specific instead of universal; hopeful rather than hopeless; and external instead of internal.

The Optimistic Approach

For instance, imagine two families whose primary breadwinner loses his or her job. Here's the difference in the way they perceive their situation:

• Optimists: "This rough patch will end and the bills will get paid; we'll tighten our belts for a little while." (temporary) Pessimists: "We're going broke!" (permanent)

• Optimists: "We have the skills, experience, and contacts to find another job; meanwhile, we're healthy, the kids are working hard in school, and our extended family is supportive." (specific) Pessimists: "This is wrecking our lives." (universal)

• Optimists: "Companies are cutting jobs across the board." (external) Pessimists: "They thought I wasn't good enough to keep." (internal)

Ideally, an optimistic approach will teach kids that while we can't control everything that happens to us, we can control our attitude about what happens to us. As Viktor Frankl wrote in "Man's Search for Meaning": "Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom."

When kids see their parents struggle honestly with challenges, overcome them or learn to accept them and live with them (rather than go into denial or flee from them), they will be better prepared to cope with their own inevitable challenges. Life pitches us plenty of curveballs. Kids who see their family come together, swing for the fence, and keep swinging even when they strike out will grow up more willing to take risks, make mistakes, learn, and grow. That strikes me as a pretty good way to pursue happiness.

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226 Comments

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  • Glenn - Tuesday, November 4, 2008, 3:00PM ET  Report Abuse

    • Overall: 3/5

    What happened to the article about the retired stay at home mom?

  • Yahoo! Finance User - Tuesday, November 4, 2008, 10:28AM ET  Report Abuse

    • Overall: 5/5

    Excellent. Thank you ! My husband and I have been talking alot about the financial mess. Unfortunately, we have friends who are in dire straits. Since our kids are only 5 and 6, we thought that they really didn't get any of the "dinner" chatter. After reading your article, I spoke to both children and found out that my 6 year old was really anxious about our neighborspossibly losing their homes. Apparently, Laura knows my children better than me. Thanks again !

  • Yahoo! Finance User - Tuesday, November 4, 2008, 7:39AM ET  Report Abuse

    • Overall: 1/5

    This article shocked me when I read it!!! Why don't we just comfort our kids about the fraud of upward mobility? This is article is just beyond reality. When I was a kid I knew nothing about crisis, downturns, or any of that. Kids should not know about that, should not care, and should be allowed to be kids. I didn't even know about recessions until I was living on my own and had to realized what the cruel world had to offer me. Should we fill our kids minds with the craps that educated / heartless humans have created for greed and control? I think not!!!

  • Gracias - Monday, November 3, 2008, 9:34PM ET  Report Abuse

    • Overall: 1/5

    Tell your kids you voted Republican. Then tell them you decided to have kids in an era of global warming and the threat of nuclear destruction. Tell them you consider yourself a responsible person.

  • Sarah B - Monday, November 3, 2008, 4:31PM ET  Report Abuse

    • Overall: 5/5

    This topic really rang true for me. My parents and my in-laws both went through tough economic times when my husband and I were young, but they handled it in different ways and it affected their kids. My family lived in denial and the atmosphere at home was always tense, although as kids we didn't know my Mom and Dad were always upset. Now two of their children move from one financial disaster to the next and don't understand why things happen to them, and the other two of their children are stuck trying to help their parents out of the mounds of debt they accumulated during the bad years. There's nothing sadder than your 24-year-old daughter having to take away your credit cards, except maybe not being able to co-sign for your child's student loans because of your low credit score. Now sure, my parents tried to teach us good financial priciples, but the results of their efforts shows that the "do what I say, not what I do" approach to parenting is at best only 50% effective. Luckily, myself and my sister married good men who were raised in families that followed the same things that Ms. Rowley has outlined (they shunned the poortalk/victim mentatility, taught them about the consequences of their financial decisions, and instilled an optimistic outlook that breeds true solutions), and we were able to learn to follow a better financial path from our husbands, in-laws, and from common-sense financial columns like this one and Suze Orman's. My mother-in-law's usual response to her children's complaints is "choices". We choose to live in the community we live in, we choose to stay in the job we're in (versus finding another job) , we choose to buy a house or not and how much house, we choose how much education to get and in what field, etc. My in-law's learned this from experience, and my father-in-law worked on an oil rig, as a park ranger, and worked his way up to the head of parks and recreation for a municipality, but it took 25 years and he had to go back to school, move his family from state-to-state and coast-to-coast, and even he even had jobs that took him away for months at a time. Basically, he did what it took to turn things around for his family, and his children learned by example and constant reminders ("choices, choices") what it can take to build an honest and successful life.

  • Mr Buffet - Monday, November 3, 2008, 1:24PM ET  Report Abuse

    • Overall: 3/5

    Talk is cheap! Parents need to show their kids by setting the example for them in the household. All the talking in the world can't replace the day-to-day experience of living a prudent lifestyle within one's means.

  • Chris - Friday, October 31, 2008, 5:03PM ET  Report Abuse

    • Overall: 1/5

    Anyone under 30 like myself faces an economy, retirement, cost of living that our parents never have faced. There will not be social security for us when we retire, most companies have done away with pension plans. Kids need to be educated starting in high school about the economy. The article regarding the 29 retired lady is a lie. The lady runs a website she is getting paid that is a job. With the economy in shambles we can blame ourselves for that. Young couples in their mid 20's buying houses bigger then their parents they take out ARM's and interest only mortgages thinking they will make more in a year or two then they dont get that raise or they lose their job what happens it gets forclosed on, As far as what the government has messed up they should have never let Lehman brothers fall lets bail out all these others companies but not them. Them (Lehman) falling had a spiral effect because you have other investment firms that have invested money in Lehman. So when Lehman fell the bank sector fell worse then it needed to because of Uncle Sam. Thanks G. W. B and Bernake way to go.

  • Brian - Friday, October 31, 2008, 11:09AM ET  Report Abuse

    • Overall: 1/5

    Like the kids care!!! Another terrible article by this so called "Expert Opinion"

  • Yahoo! Finance User - Thursday, October 30, 2008, 2:35PM ET  Report Abuse

    • Overall: 1/5

    This post has nothing to do with the current article...I'm just so blown away by Ms. Rowley's idiocy in writing the "Retiree at 29" article that I had to continue my criticism. Let's see what Ms. 29-year-old-master-of-the-universe likes to do w/ her time as a "retiree." -- She "loves her new schedule more -- hanging out with her kids, meeting family and friends for lunch, blogging three mornings a week." Retirement doesn't mean no more income," says DuPaix. "It means doing what I love, and knowing when I wake up every day I can do whatever I want." ...DuPaix, you should be beaten with a wet towel for your lack of contribution to society. Retirement means "doing what you love"? You love to have lunch with people and hang out with your kids - wow, that's a revelation. If I were your husband I would leave you and likely kill myself because I'd made such a terrible mistake marrying you to begin with.

  • RichardR - Thursday, October 30, 2008, 10:18AM ET  Report Abuse

    • Overall: 2/5

    Tell your kids Santa Clause died so he won't be bringing presents anymore.

  • Jim - Wednesday, October 29, 2008, 11:20PM ET  Report Abuse

    • Overall: 1/5

    Don't burden you kids with this. It's an adult situation, created by (what some definitions would call) adults. Stop trying to make yourself feel better by hoisting our problems on our kids. Let them be kids and deal with the situation as a grown-up. Kids don't have to know everything.

  • Yahoo! Finance User - Wednesday, October 29, 2008, 10:09PM ET  Report Abuse

    • Overall: 4/5

    Teach your children the basics so they will understand what is going on! Check out My First Finance Book at www.kiddiefinance.com

  • Danny - Wednesday, October 29, 2008, 9:00AM ET  Report Abuse

    • Overall: 5/5

    More things need to be written such as this. So many people in this rocky society see the gloom without noticing the silver lining. Maybe it is too bright, too far away, or just too complicated to understand. Either way, its a good thing to know history (and the govt) will restructure. I have to remind myself often of this being a cycle and inform my kids, rather than scare them.

  • Martin - Tuesday, October 28, 2008, 8:06PM ET  Report Abuse

    • Overall: 2/5

    great article, bright woman.

  • Yahoo! Finance User - Tuesday, October 28, 2008, 5:41PM ET  Report Abuse

    • Overall: 1/5

    Kids want to grow with right sense of finance and facts not lying about the crisis of family situation, the earlier the better

  • Yahoo! Finance User - Tuesday, October 28, 2008, 2:51PM ET  Report Abuse

    • Overall: 3/5

    Dear kids -- Christmas is cancelled because we were fools with our finances, and just like a squirrel who doesn't save enough nuts for the winter, we may not see spring.

  • zzzzzzz - Tuesday, October 28, 2008, 2:44PM ET  Report Abuse

    • Overall: 4/5

    Step 1: Blame Bush Step 2: Vote Obama Step 3: Collect gubment check

  • scarf - Monday, October 27, 2008, 9:57PM ET  Report Abuse

    • Overall: 3/5

    Optomists: We're going to free ourselves of boundaries and fill our lungs with fresh air. Pessimists: We're going to live out of a shopping cart because the house your moron parents couldn't afford just got foreclosed.

  • microtrendtrader - Monday, October 27, 2008, 10:02AM ET  Report Abuse

    • Overall: 4/5

    As an family that has two family-run businesses, our kids are involved with the family money every night at the dinner table. They know about market trends, cash-flow, lines of credit, and probably more than most adults about how the economy works. I think we DO need to talk with kids about money, but let them know that it's the parents responsibility to create the funds necessary to fund the lifestyle. Interestingly, it was my youngest who came to the party first when he suggested that "we don't really need that" and wondered why we were even discussing the purchase-- as it turned out we passed for a while. Not never, but not right now. Kids get it. They need to learn how the world works. It is true that we can rarely change what happens to us, but we have complete control over how we view the news. Teach kids how to be flexible and they will have economic options in the future.

  • Love2Fly - Monday, October 27, 2008, 12:15AM ET  Report Abuse

    • Overall: 2/5

    Ok Sweety, there are two groups of people who want to run the country, the democrats (dems) and the republicans (reps), both groups have different ways of running the country. The dems like to give money to the poor people that don't want to work. The rep like to give money to the rich people that want a lot more money, it's like you with the cookies, you can't have just one; this is called GREED (word of the day). The dems like to watch you a lot; kind of like mommy and I watch you and we keep telling not to do that. The reps don't like to watch anybody and so the rich people can get richer by any means, even if it means we have to pay more for milk to make your cookies, by the way, a gallon of milk is still at $3.79 even though gas dropped to $2.89, this is a example of GREED, the milk people want to make more money and the government don't want to tell them not to do that. So you see, every four years mommy and I have to make the decision to help the poor people that don't want to work or the rich people that want more money. Mommy wants to keep helping the rich. Daddy decided it is time to help the poor; daddy thinks the economy hurts more if the rich people have their ways.

  • Timothy - Sunday, October 26, 2008, 11:14PM ET  Report Abuse

    • Overall: 2/5

    Why do kids need to know about this. They are kids. Jeesh.

  • Vinny - Sunday, October 26, 2008, 10:20PM ET  Report Abuse

    • Overall: 1/5

    “I believe that banking institutions are more dangerous to our liberties than standing armies,” wrote Thomas Jefferson. Teach your kids about the evils of all large governments, The Federal Reserve and the fractional reserve banking system...they won't learn it at school.

  • Yahoo! Finance User - Sunday, October 26, 2008, 9:30PM ET  Report Abuse

    • Overall: 2/5

    OK, son here goes nothing. a bunch of rich pricks on wall street and in government developed a scheme to become even richer at the expense of Joe Average. now we are about to elect a President who has a plan to extract huge amounts of money from your future salary and college savings to help the deadbeats of society, who want a check and don't want to work. this same leader wants to restrict your 1st and 2nd Amendment rights, which unfortunately you don't understand, but your fearful parents do. that coupled with brainwashing and reeducation camps will be in your future. you will soon be wearing a uniform and calling your friends comrade. you may also need to learn how to speak Chinese or Spanish, depending on where we live.....your future looks bleak my son, good luck.

  • Eric L - Sunday, October 26, 2008, 5:30PM ET  Report Abuse

    • Overall: 2/5

    Kids shouldn't even be involved in this. If the family lives within their means then it won't be a problem. A child's life should be carefree. When I was young we were poor. But I never knew it. My parents financial situation was none of my business. I had no idea what a "play date" was......But I spent every waking hour outside playing with my friends.

  • Yahoo! Finance User - Sunday, October 26, 2008, 5:01PM ET  Report Abuse

    • Overall: 5/5

    Google CNet, Apple is bad. Please, bring down these shares for the companies owners / shareholders need to be punished for been against Proposition 8 in Cal. If Yahoo support the proposition, make Yahoo shares go up. Other wise it belly under to Yahoo.

  • Mr. ED - Sunday, October 26, 2008, 3:24PM ET  Report Abuse

    • Overall: 2/5

    The magical word here is GREED !! that is what was & is the problem in a nutshell from the get go! I liked the point in the story about " Extreme Home Makeover"...well I haven't seen Ty yet. I read a lot of comments and I must be in the minority because I am DISSABLED and my family of 4 has to make it on less than $18,000 a year . .Ive seen people worry because they can't decide if they should give up their $30,000 countryclub membership, it makes me sick. The reason we are in this is not the POOR and I'm sick of hearing that too ,if someone can afford $600 a month for a house then that's what they should have to pay ...NOT change the payment to $850 in two years DUH ..they could keep their house and the INVESTORS would get their money..problem solved. so why don't the more well to do stop harrassing the not so well to do. because there are alot of us that can't help that we are where we are. some of us CAN"T JUST GO OUT AND WORK HARD for more money.........why dont Yall think about that..Thanks

  • Rodger - Sunday, October 26, 2008, 2:23PM ET  Report Abuse

    • Overall: 2/5

    Rodger Darr says - Give this to your kids as an explanation of the financial meltdown. I took this straight out of Wikipedia's listing for "Ponzi Scheme". It sites this as a general eample of the scam. Here goes - An advertisement is placed promising extraordinary returns on an investment – for example 20% for a 30 day contract. The precise mechanism for this incredible return can be attributed to anything that sounds good but is not specific: "global currency arbitrage", "hedge futures trading", "high-yield investment programs", "Offshore investment", or something similar. With no proven track record for the investors, only a few investors are tempted, usually for smaller sums. Sure enough, 30 days later the investor receives the original capital plus the 20% return. At this point, the investor will have more incentive to put in additional money and, as word begins to spread, other investors grab the "opportunity" to participate. More and more people invest, and see their investments return the promised large returns. The reality of the scheme is that the "return" to the initial investors is being paid out of the new, incoming investment money, not out of profits. No "global currency arbitrage", "hedge futures trading" or "high yield investment program" is actually taking place. Instead, when investor D puts in money, that money becomes available to pay out "profits" to investors A, B, and C. When investors X, Y, and Z put in money, that money is available to pay "profits" to investors A through W. One reason that the scheme initially works so well is that early investors – those who actually got paid the large returns – quite commonly reinvest (keep) their money in the scheme (it does, after all, pay out much better than any alternative investment). Thus those running the scheme do not actually have to pay out very much (net) – they simply have to send statements to investors that show how much the investors have earned by keeping the money in what looks like a great place to get a high return. They also try to minimize withdrawals by offering new plans to investors, often where money is frozen for a longer period of time, for example 50% return per month for one year. They then get new cash flows as investors are told they could not transfer money from the first plan to the second. The catch is that at some point one of three things will happen: the promoters will vanish, taking all the investment money (less payouts) with them; the scheme will collapse of its own weight, as investment slows and the promoters start having problems paying out the promised returns (and when they start having problems, the word spreads and more people start asking for their money, similar to a bank run); the scheme is exposed, because when legal authorities begin examining accounting records of the so-called enterprise they find that many of the "assets" that should exist do not. [edit] What is and is not a Ponzi scheme

  • First L - Sunday, October 26, 2008, 1:32PM ET  Report Abuse

    • Overall: 5/5

    I think this should be called, "What adults can learn from the Economic Crisis"! :)

  • Yahoo! Finance User - Saturday, October 25, 2008, 3:14PM ET  Report Abuse

    • Overall: 5/5

    Exactly! Tell the children the TRUTH. Tell them that the country has been screwed by the poor who bought what they could not afford, by the mortgage and finance industry who enabled them, and finally, by the liberal-entitlement government entities who enabled BOTH. You should also add that we've all been screwed by the media who were too busy creating the world in their own image that they neglected to investigate and infom us that the real world was going to hell. Here's a variation of a wise old proverb you might teach them: Give a man a fish and feed him for a day, teach a man to fish and feed him for a lifetime, teach a man how to STEAL fish and we all get SCREWED!

  • Tim - Saturday, October 25, 2008, 3:08PM ET  Report Abuse

    • Overall: 2/5

    We just need to let real estate prices fall to year 2000 levels, then we will be back to historic norms and can rebuild this Country. No amount of government aid can stop simple economics. This is just America itself fighing the Repulicans to return to normal. No people real estate appreciation wasnt magic. It was just stupidity.

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