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.
There are things that you can do that will make your debt confession to your children easier for you and easier for them.
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.
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.
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.
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.
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.
SHANNON RYAN, CFP®
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. :)
I would be interested in more on this as well as how to discuss income with kids.