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How We Told Our Children About Our Debt Situation

How We Told Our CHildren about Our Debt Situation

Parents sometimes struggle to start the initial money conversation, especially when there is family debt. To help you get started, I invited Laurie from The Frugal Farmer to share with you how they told their kids about the family debt, and the difference it made in their lives.

December 2012: I remember the day, if not the date, like it was yesterday. It was the day we sat down and told our kids about the financial mess we’d gotten ourselves into, and the day we informed them that life was about to change.

Although we didn’t do much in the way of buying toys and such, unless it was a birthday or Christmas, we were pretty lenient about things like going out to eat, doing activities like bowling, and buying clothes that they wanted. In 2012 we’d cut back a bit on our spending, but to nowhere near the level that we needed to cut back. It was then that we started using terms like “we can’t afford that”, etc., etc. After going back and assessing our 2012 spending, we got a real eye-opener. Even after “cutting back”, we found we were spending nearly $200 a month on eating out alone. It became clear that we had serious work to do, and that this time, the kids would notice a definite change in our lifestyle.

We sat them down, explained our dilemma, and told them how much debt we had. Yes, their eight little eyes were as wide as saucers. At the time, the kids were 12, 9, 8 and 6. Not old enough to entirely understand, but old enough to know when we said we’d be cutting way back that a lot of our former activities would have to go away.

I would say that, by and large, their reactions were ones more of disappointment than of anger, and who can blame them? As parents, children trust that we are doing what’s in the best interest of the family in all matters, and Rick and I clearly hadn’t been doing what was best for our family financially, even if we thought we were.

Shortly after our debt payoff journey began, we “interviewed” the kids and asked what they thought about our new lifestyle. Some answers?

Kid #2 – “Sometimes I think it’ll take a long time, and I feel disappointed.”

Kid #3 – “I feel sad that we can’t do the stuff we want to do.”

It was hard, on an emotional level, for us to hear those comments from the kids, but we knew we were doing what needed to be done, and that they understood why we were making the changes we were about to make. It also felt good to be honest with them. We no longer had to make excuses about why we weren’t spending money.

Coming clean with our kids about our debt situation turned out to be one of the best decisions we would make.

Some Tips for Coming Clean With Your Children About Your Debt

There are things that you can do that will make your debt confession to your children easier for you and easier for them.

Be Straightforward, But Do it Carefully

Just make sure to do that at age-appropriate levels for your children. Don’t tell your 4-year-old all about your DTI and debt interest calculations. Make sure you’re being honest, but keep the information you share comprehensible, too. Also, it’s important when being honest about your debt situation that you work hard not to scare the children. Be positive while being honest, and make sure they understand that you are committed to holding the family together. Revelations like “my family’s in huge financial trouble” can be very traumatizing for young minds, and they’ll need to be able to read your thoughts and know that you’ve got an attitude of victory despite the situation.

Explain the “Whys”

I think it’s important to spend at least a little bit of time explaining how your debt mess occurred. This shows your children how money problems can get out of hand, and it shows them that you’ve taken responsibility for your part in the debt problem, which helps them have more confidence that you’ll stick with your plan for dumping your debt.

Give Them the Details of Your Plan

At least give them the details that pertain to their world. Tell them what the entertainment budget will be and what the grocery budget will be. Tell them if you’ll be selling something that’s important to them, such as a boat, car or home, in order to reach your debt payoff goal faster. Make sure they know of the steps that will be taken to reach your family’s goals, so that they’re not surprised when specific changes happen.

Keep Them in the Loop and Make it a Team Effort

We give our kids monthly updates on what we spent in each area, such as grocery and entertainment, and how much debt we pay off each month. Just like it’s encouraging to us, it’s encouraging to the children that we’re making progress. Also, when it comes to entertainment monies, we let our kids be involved in decision making as to how we’ll spend each month. We’ll say things like: Kids, we’ve got $50 left in the entertainment fund for March; do you guys want to spend $25 of it at McDonald’s or save it for something else that might come up? Making sure they are allowed to participate in some of the spending plan helps them feel more in control of the situation.

Shortly after we started our road to debt freedom, we asked the kids what would be the best part about completing our debt payoff plan. Some of their answers?

Kid #1 – “The financial peace we’ll have and the freedom we’ll have to do the things we enjoy.”

Kid #4 – “We’ll be glad we haven’t been spending money, because it means we’re getting out of debt.”

It’s nice to know that we are indeed working to reach that goal of debt freedom, and it’s nice to know we’re doing it together – as a family – with the full support of our children. There is indeed strength in numbers.

Telling your children – at any age – of your debt or money problems can seem like a very difficult thing to do, and no one’s saying it’ll be easy, however the freedom of not keeping your debt burden away from those you love most is priceless. 🙂

Editor’s Note: Thank you for sharing your story with us, Laurie. It is not easy to start the conversation, but once you do, it feels so good—just as you discovered. These are great steps to follow and going on this journey with your kids benefits everyone.

About Laurie

Laurie is a wife, mother to 4, and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom, and to a simpler, more peaceful life.. You can connect via Twitter | Facebook.

April 30, 2014  •  36 Comments  •  Guest Posts

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  1. Wednesday, April 30th, 2014
    Great post, Laurie! I think this would be a really difficult thing to do. I can see how it would become very easy to avoid this discussion, potentially forever. I know growing up I was always wishing I had a better idea of what my parent's finances were like instead of always having to guess or interpret vague comments.
    • Wednesday, April 30th, 2014
      Thanks, DC! Our parents were the same way, and I think that's partly why Rick and I got into so much debt. We just never had any idea what our finances were supposed to look like!! When we opened up our situation to the kids, however, it started them too on the road to a great personal finance education.
  2. Wednesday, April 30th, 2014
    Thanks for sharing this Laurie. I can imagine how hard it must have been to sit your kids down and explain about the debts to them. It sounds like they coped brilliantly and all credit to you and Rick for being strong for them. My daughter is just three so I won't be sitting her down just yet but I definitely will when she's older. Hopefully, we'll be debt free by then! :)
    • Wednesday, April 30th, 2014
      I'm sure you will be debt free by then, Hayley. :-) Yes, we are really glad we shared our situation with the kids. It's making the journey to debt freedom lots more fun, because we're doing it as a family. :-)
  3. Wednesday, April 30th, 2014
    You went about it in a great way, Laurie. My parents never spoke to me about their debt. I just knew they were very pressed for money and stressed out about it. I was around 8 when I started hearing "No" more often, or, "We can't afford it." I didn't know why, though. Overall, I became afraid that we weren't financially secure. It got worse as I grew up and actually understood what was going on.
    • Wednesday, April 30th, 2014
      That sounds very similar to my story, E.M., which is part of the reason we wanted to be honest with our kids. We didn't want them to grow up with all of the fears we had about money as children. Your parents have done a great job of getting their finances together too, as they learn from their daughter, which is very, very cool. :-)
  4. Wednesday, April 30th, 2014
    Shannon, Thanks for sharing Laurie's post with us today. This was a great one.

    Laurie, I wish my parents had come clean about their financial problems when I was a kid. I never knew about them and they never really "taught" me much about finances. You are doing a great job paying off your debt and a great job involving your kids in the process. :)
    • Wednesday, April 30th, 2014
      SHNM, I can totally identify. Thanks to awesome mentors like Shannon, parents are slowly learning how important it is to involve their children with the family finances. Thanks for that, Shannon!
  5. Wednesday, April 30th, 2014
    Shannon, thank you SO much for featuring our story on The Heavy Purse today. You have been such an amazing mentor to Rick and I as we walk this journey. We will forever appreciate your wisdom, encouragement and support. :-)
    • Shannon Ryan
      Wednesday, April 30th, 2014
      Thank YOU, Laurie, for sharing your story with us. You're helping parents find the courage to talk to their kids and make a huge positive change together. I am so glad that I have been able to help you and Rick on your journey to financial freedom. You guys are doing fantastic! :)
  6. Wednesday, April 30th, 2014
    Thanks so much for sharing this with us Laurie. I can't even imagine how difficult it must've been, but know that it was likely an important first step in beginning to teach them more seriously about money matters. Unfortunately, far too many parents don't take this step and hide it because they don't want to impact or scare the kids when, in fact, I believe it's the loving thing to do - when done appropriately. :)
    • Thursday, May 1st, 2014
      You know, John, it's really been a blessing for our family. The kids will now leave the nest for adulthood knowing how money problems can get out of hand, and having the necessary tools to avoid the mistakes we made with money, and we are so very glad that being honest with them about our debt situation catapulted such great money discussions. Good stuff!
  7. Wednesday, April 30th, 2014
    Thank you SO much for sharing your story Laurie!! It does feel awful to have to admit to our children that we are not perfect and make mistakes. I have found, though, that as long as you are open and honest with them, though, you can work through anything together. It is also a healthy lesson for the kids about honesty in the home. Good for you guys and I am happy to hear that you all are working together as a family!
    • Thursday, May 1st, 2014
      Great point, Shannon. It does feel good knowing that we've taught them the lesson that everyone makes mistakes, it's what you do after those mistakes that counts. :-)
  8. Wednesday, April 30th, 2014
    As hard as that conversation must have been, I'm sure the kids understand it much better than if you'd decided to say nothing and had hushed conversations behind their backs and just stopped doing things you were used to. They probably don't even miss that much. I'm sure many things parents do are because they think it's what society expects instead of what the kids really want, which is quality time spent with you. A picnic and walk can be as much or more fun that a trip to the bowling alley.
    • Thursday, May 1st, 2014
      You know, Kim, it's funny: the kids now are more averted to spending money than we are. When we go to make a purchase, they're like "Do we really need to buy that?" My 2nd oldest saw me use the credit card the other day (for points purposes) and said, "Mom, isn't that a credit card and not the debit card? Why are you using that?" It was awesome, and she felt much better once I explained to her that we use it for rewards and that we transfer the cash from our checking account as soon as the purchase posts. :-) I love, though, that she had the courage and the know-how to call me out on my behavior.
  9. Wednesday, April 30th, 2014
    I'm sure that wasn't an easy conversation, but as a kid I remember feeling I wanted to know some things that were going on with my parents, otherwise it felt too secretive. I like how everything is a team effort!
    • Thursday, May 1st, 2014
      I remember that too, Tonya!!! It feels so much better as a parent, knowing that we have open and honest relationships in our home, and having the kids know they can come to us and ask about things such as money.
  10. Wednesday, April 30th, 2014
    Thank you for sharing your story with us Laurie. I can only imagine how difficult a conversation that must have been to have with your children. But kudos to you for recognizing that your family needed to make a change and the strength to see it through :)
    • Thursday, May 1st, 2014
      It really has been great for us. And as hard as it was for the kids to hear about our mess, it's taught them so much about what NOT to do with money, and that's a good thing. Thanks, Mackenzie! :-)
  11. Wednesday, April 30th, 2014
    I love that you included your children in the process. I hate when parents say "because I said so", rather than giving their kids the opportunity to understand and be involved.
    • Thursday, May 1st, 2014
      Thanks, Stefanie. We've always been big believers in explaining to the kids why we do things a certain way and why we expect them to do things a certain way. It's really helped for them to choose their actions wisely.
  12. Wednesday, April 30th, 2014
    Hey Laurie, first off...Awesome post! I don't have children yet and finances have a bit to do with that. I'm hoping that I'll never have to talk to my kids about my debt, but I'll still have the opportunity to teach them about debt and how to avoid it. I could imagine how hard it must have been to have this conversation! Thanks for sharing!
    • Thursday, May 1st, 2014
      Joshua, you'll do a great job with your kids simply because you're choosing to educate yourself about these things now. You're scores ahead of us. :-)
    • Thursday, May 1st, 2014
      Thanks Laurie, I hope you're right!
  13. Thursday, May 1st, 2014
    We told our kids about our situation as well for two reasons: 1.) our get out of debt efforts would affect all of us for a few years 2.) We really wanted to show them the consequences of not handling finances correct, but also that it is possible to get back on the road to recovery.
    • Thursday, May 1st, 2014
      Same here, Travis, and I know you guys are just as glad you told your kids as we are. And like ours, your sweeties are well on their way to a financially responsible life. Woohoo! :-)
  14. Thursday, May 1st, 2014
    Great post and certainly amazing insights by your kids. I was shocked to hear the reference to "financial peace" at such a young age.

    I would be interested in more on this as well as how to discuss income with kids.
    • Saturday, May 3rd, 2014
      Thanks, Sam. Yes, we've seriously drilled what we've learned about money into our kids - and because of that, they're learning well. You should check out Shannon's books on this, or my new e-book - lots of great tips on how to talk with your kids about money.
  15. Thursday, May 1st, 2014
    I'm sure that must've been tough. I think getting involved in the decision making process was a great move. I'm sure as disappointed as they were, by making them part of your plan, they're were probably happy to work together, to come up with ways, to help out mom and dad. Great post Laurie! Thanks for sharing!
    • Saturday, May 3rd, 2014
      Thanks, Anthony. Yes, it was definitely difficult to look them in their cute little eyes and confess that we'd screwed up - big time. But they've definitely rallied around us and we now work as a team to get the debt gone. There are still days when they're frustrated by our situation, as we are, but knowing that we've got a plan in place and are working that plan has helped our attitudes tremendously.
  16. Saturday, May 3rd, 2014
    I think this was a tough conversation to have, but I bet it really pays off -- and not just in obvious ways. I think kids are so protected from the need to help do something real to provide for the family that they end up feeling kind of useless, like they're "on ice" until they're out of college. The students I know who've had real responsibility -- whether that means a job or something else -- are the best students, too, because they're more confident people.
  17. Sunday, May 4th, 2014
    Thanks for sharing! I don't have kids yet, but I hope we'll be honest with them and they'll start out with a great foundation. I'm making sure to teach my 11 year-old "Little" in the Big Brothers Big Sisters about budgeting since he wants things and doesn't know how to get there unless someone just gives it to him. We already set a limit of $20 to our weekly activities and save whatever we don't spend. Then we can save towards a larger goal like a theme park. He's really getting into it - even orders waters now if the drink doesn't come free with the kid's meal!
  18. Tuesday, May 6th, 2014
    It's so important to include kids in the discussion in an age appropriate manner in discussions on family finances. I like that you give them choices on what certain budgets will be spent on. This gives them some control in the situation and opportunity to voice concerns and worries.
Shannon Ryan SHANNON RYAN, CFP®
  • Meet Shannon

    "As a Certified Financial Planner, it is my passion to help individuals and families build a healthy relationship with money. I look forward to helping you raise financially confident kids.” - Shannon Ryan
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