Talking your children through financial crisis

February 21, 2009 5:54:50 AM PST
During this financial crisis, one of the most difficult problems at home may be how to talk to your children about your own unique situation. Financial planner and financial literacy expert with Lenox Advisors, Tom Henske, joined us with tips. Q: How should we be talking to our children about this financial crisis?
A: It is certainly no fun sitting around and obsessing about the decline in the equity markets. But when environments like this arise, when it seems darkest, there are always investment opportunities. And the biggest investment opportunity I see today, is for parents to make a life long contribution to their children by investing in the child's financial literacy.

Q: What do you mean by financial literacy?
A: As parents, we have become consumed with our childrens' math and English scores. But, when it comes to financial literacy, money skills, our children are absolutely bankrupt. How could it be that our children are guaranteed to have to have some basic money skills, and values around that money, and that there are only three states which have mandatory curriculum requiring students to take a sememster long class on learning about money. That seems to be a problem to me.

Q: And so why now?
A: What better a time to start teaching kids about money then when the media is abuzz 24 hours a day on the topic of money. Your children are having the conversations. And you can bet it is not in a formal classroom setting. It's not that far from sex education. You can either have your children learning about sex from their friends, or you can have a values based conversation with them yourselves, to control the information flow. While the natural feeling is to clam up and pretend our lives are business as usual, that strategy completely ignores the opportunity to give your children a tremendous financial literacy lesson embedded in the current events.

Q: Give us some tips. How do you approach this?
A: Start with these: · Children are smart. Don't try to ignore or sugar-coat the events going on around them. They are not blind to them and treating your children as such is not a confidence builder for your integrity in their eyes. Children will make the event scarier in their minds if they think you're keeping a secret. They might even think it's their fault. Children might not link the new household stress to the world's financial situation, rather thinking it was something they had personally done. When they start asking about money there is no better time to start teaching. In his book, Dr. John Whitcomb suggests this language: "We're in a tough spot at the moment as far as money goes. We've got problems and we all have to work together to solve them. You're the most important person in the world to us. Let's do this together and we're going to figure it out."
· Be aware your children will also link you to the crisis but may not ask if you (and then, of course, the family) are going to be okay. Be direct. "(Mom or Dad) are fine. Everything will be okay." And, if possible, "We still have our jobs." But most important, "We still have each other."
· Monitor the media. Limit the messages that your children are being exposed to through television. Use this time to have meaningful conversations with the kids.
· Make conversations age-appropriate. The best way to know which direction to go is to find out what is actually "keeping them up at night." Find out what their specific questions are on the topic. You'll find things like:
o Will I still be able to go to summer camp?
o Will we have to move away?
o Do we have enough money for gas?
Start with their questions and then, if the interest in learning persists, use this as a spring board to teach them about other financial topics. For example, you might find a younger child interested in opening up a savings account at a bank and an older child interested in learning about more about the stock market. Learning about ANY financial topic trumps their not being interested in anything. Don't be picky about the topic they choose?just run with the desire to learn on the macro topic of money.

Also, it is time for parents to start monitoring what's coming out of their mouths at home. Children can take comments quite literally, and when a joke is made (like, "one more day like this and we're going to be living on the street") your kids can take that as a serious comment. They do live in your house. They do have ears. Your comments have to be monitored.

· Let them help. If they look to become part of the solution instead of part of the problem, don't deny them that access. Task them with trying to find ways to cut back. Yes, their suggestion might be just a drop in the overall household budget. However, going to the movies less, or downloading iPod songs, gets them in the mindset that at a time when the family is going through a difficult time, they all band together to make it through that time. Not only does this become a lesson in budgeting, but more importantly a lesson in family unity and values.

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