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Explaining the Recession and Teaching Financial Literacy to Kids

The recession is hard. It is hard on parents and it is even harder on kids. Parents may be struggling, may feel out of control, but at least they have some knowledge of their financial situation, some understanding of why all of this is happening. The kids are often left in the dark, with no explanation, confused and wondering why their family can't afford the things that they want, the things that they need.

My son is going to the dentist soon to have a few cavities filled. He has been complaining about them and asking me when we are finally going to have his teeth fixed. It is expensive, very expensive, and I am fortunate that we have dental insurance that will cover part of it and we can afford to pay the rest ourselves. At least I can give him a date when his teeth will stop hurting. I cannot imagine the pain of having to tell him, I'm sorry but we can't get your teeth fixed. But other parents do have to tell their kids that. All the time.

Mommy Melee wrote a moving post and call to action for people to reach out to those in need and try to give the children of the recession a voice and a chance.  Please read it.

Those of us that are more fortunate should help. But we also have a responsibility to our children, to help them understand what is happening, to help them be more financially astute than our generation was, to get them on a better path.

I was saddened this morning when reading Dear Abby in the newspaper to read the letter from a teenage girl who was upset that her parents wouldn't talk to her about their financial situation. I think not talking creates more worry. I think we need to open up to our kids.

A while back the Globe and Mail published a great cartoon to explain the global economic crisis to children. I think it is a great place to start if you, like Her Bad Mother who wrote about how (No) Money Changes Everything, are struggling to find the words to explain what is happening to the little ones in your home.

The economy: a bedtime story from GlobeInvestor on Vimeo.

There are other resources too and with kids these things do bear repeating and corroborating through different approaches, especially when you're battling with the ever more desperate advertisers targeting your kids. Here are some that I like:

  • You can seek out ways to battle the consumerism that is bombarding us and our kids left, right and centre. I wrote about this in the pre-Christmas season in my post Quelling Crazed Consumerism (includes lots of links to resources).

I think that as parents we need to show our kids love and compassion even when we are struggling ourselves. We also need to give them tools to become financially literate so that their generation can hopefully avoid the situation we have gotten ourselves into.

What are you doing to teach your kids about finances, the recession and the economy?
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Reader Comments (21)

Thank you for giving this dialogue more exposure. It's something we all need to talk about. So much more than we need to be talking about ads and reviews and sponsorships and trips, you know?

May 22, 2009 | Unregistered CommenterMaria

I grew up in complete poverty. Homeless, actually. So I have a LOT of respect for where money comes from. My husband, however... not so much. His parents did well, and he's an only child, so he got whatever he wanted, whenever he wanted it. He's very good with his money (better than I am, really) but as a child he had NO concept of money, and he didn't want his children to either.

Well, that was one of the many things we sparred over before we had kids. He didn't want his children to have a job in high school. He wanted them to play all the sports he did, and never have to work becuase he didn't think it was fair to make them (which was how he was raised.) Well, I've been working for pay since I was 11, supporting myself completely by age 18, so that idea was totally unacceptable to me.

Luckily, he realized the error of his thinking before we had kids, so whether or not they'll have a job in high school and college is one less thing we debate about (they absolutely will, if they want to have any access to a car, or spending money, or a social life.)

But whether or not we should explain to the children how hard we work to give them this life is something we still aren't necessarily in agreement on. He doesn't think they should worry, but I think that everything is a life lesson. I get worried all the time that my children will grow up spoiled because they don't have the benefit of having grown up in poverty, like me, to give them a special appreciation for money.

Luckily, my kids are too small to understand any of this stuff right now, but one day, we'll be needing to figure all this out.

May 22, 2009 | Unregistered CommenterTheFeministBreeder


I played sports in high school and worked multiple jobs - teaches multi-tasking, priority setting, etc. which are also important life skills.

With regards to kids understanding how hard you work, I think it is important. Especially when you do have to leave them. I want my kids to know that when I am not with them it is because I am working hard to support them. My son is starting to understand...when I told him we didn't have money for a toy he wanted he said I should work more. I asked if he wanted me at home more to be with him or if he wanted the toy and he said he wanted the toy....I guess we still have work to do on the consumerism thing.

May 23, 2009 | Unregistered Commenterphdinparenting

Haaa haa... he wanted the toy. These kids - I swear.

I always wonder whether my kids would be happier if we were poorer, but I stayed home - or if they'd be happier when I'm a laywer who works too much, but can give them more stuff and make sure they can afford to go to whatever college they want.

I dunno. I just hope they appreciate what I've done for them, and know I did the best I could, either way it works out. I just want them to be happy and feel loved.

May 23, 2009 | Unregistered CommenterTheFeministBreeder

laywer? Um. Yeah. LaWYer. 11 pm dyslexia has set in.

May 23, 2009 | Unregistered CommenterTheFeministBreeder

[...] Explaining the Recession and Teaching Financial Literacy to Kids [...]

I recently lost my job, and I've told my 4-year-old. Not to scare her, but because I knew she would overhear me talking to others about it and I wanted to explain it on my own terms first. She's told me that she will give me a job to write her stories. So, you know, at least I have that to fall back on. :)

On a more serious note, obviously we've set up an allowance. And we love it! When my daughter asks for something that I'd rather not pay for, she can spend her own money. It's worked very well for us, and reduced money battles considerably.

May 23, 2009 | Unregistered CommenterAmber

[...] This post was Twitted by kdcargirl - Real-url.org [...]

May 23, 2009 | Unregistered CommenterTwitted by kdcargirl

hi there. first time commentor. i didn't have time to read everything -- just hopped online while nursing -- but i did want to comment on the dear abby situation. for my family, money was always tight, always a worry. for the most part my mom and dad concealed that from us. sometimes though, my mom would get so stressed that she would tell us what was going on, and i can say that as a young person it was scary. i remember being maybe 10 or 11 and lying awake at night worrying about how we were going to pay for stuff, because i knew my mom was worried. no kid should have to do that. i do think there is a place for openness about the family's money situation, but i also think some stuff should just be handled by the adults so the kids don't have to worry.

so i guess i am just suggesting age-appropriate disclosure?

May 23, 2009 | Unregistered Commenteralissa

@alissa - Thanks for commenting! Age appropriate disclosure for sure. I think the problem comes in when kids know or perceive enough to worry, but don't then aren't given any details. They may lie awake at night worrying unnecessarily.

May 23, 2009 | Unregistered Commenterphdinparenting

I really wish my parents were more open about the financial situation. When I was around 12, there was a rule in the house, "No wearing bell bottoms." They were the "in" thing right now and I felt my parents just had rules to have rules. It was a constant point of struggle because it didn't make sense to me AT ALL. It's not like bell bottoms are skanky. Well, years later, I found out that the bell bottom jeans were the more expensive kind and they couldn't afford those and that was the reason for the rule. A lot of struggle and my distrust to them and their nonsensical rules could have been prevented if they had been more upfront: I was 12 and could definitely understand money issues. And that lack of faith of my ability to understand the problems (and others- this wasn't the only struggle I had with my parents growing up) really bothers me to this day. My DH, on the other had, had a family much more open- in fact, the children donated 10% of their earnings to the family budget when times were rough- that was something decided on the whole family during a family budget session.

May 23, 2009 | Unregistered CommenterTopHat

Personally, I think the best message for all our children is that money can't buy everything. Moreover, the fact that we'd all become so bound up in the business of making and spending it, we came to think it was the answer. It isn't. Shopping isn't recreation. I'm talking means, and ends here...

May 23, 2009 | Unregistered CommenterTim Atkinson

Great post, and a good reminder that sometimes being open with our children is a much better approach than trying to hide the truth. They are smarter and more aware than we give them credit for, and no matter how we think we are talking about things when they aren't 'listening', little ears hear so much. I think it's better to be open so they know that their fears and concerns can be expressed, rather than them worrying on their own.

My children are too young to understand the recession, but I've started combatting consumerism. I don't buy everything he asks for, don't reward with items etc. In fact, my son has never thrown a temper at check out in an attempt to get something. Let's hope that stays.

Another wonderfully, well-researched post. Thank you

May 23, 2009 | Unregistered CommenterRebecca

Thanks for including me. Nice selection of links on a very relevant topic.

May 23, 2009 | Unregistered Commentermother in israel

My daughter is 5 so doesn't understand a great deal about the recession, but she has learnt that she can't ask for whatever she wants and get it, the recession has helped us both learn the value of money a lot more. I think it's important to communicate with children about everything, not just money.

May 23, 2009 | Unregistered CommenterRosie Scribble

Thank you for this. Between the confessions and the exhortations to band together and help each other, we still need this: advice. Simple tips on how to navigate the recession as parents.

Thank you. Really.

May 25, 2009 | Unregistered CommenterHer Bad Mother

[...] timely topic: PhD in Parenting talks about explaining the recession and teaching financial literacy to [...]

I suck at this. I need all the help I can get - all those resources you mentioned? Should be for me, first. Then I can get a handle on the situation, I'll teach my kids about being smart with money, and all that. This is a great post, as per usual, though. I guess I should not admit that I have said: "Christos, please I'll give you 100 dollars if you just let Dimitry play with that toy!" ;)
Seriously, though... my oldest son who is 3 and a half knows that mommy works because we need money - money pays for our food, our clothes, our books, etc. We talk to him about people who are less fortunate, we talk to him about donating items he doesn't want anymore, and this summer we are going to have a garage sale - and he can keep half he profits, the other half, we'll give to CHEO.

May 26, 2009 | Unregistered CommenterLoukia

In regards to sharing if you are more fortunate: My husband and I certainly aren't rich. But being in Canada, we're not affected as badly as the US is, plus we get a year's worth of maternity leave (if we choose to take it, at 55% of our earnings prior to mat leave).

What my daughter (5 months old) will learn from us is charity. I found out that our local food bank will take diapers - any size, any brand, even opened packages. They divide them up and on average 6 diapers go into a hamper for a family with a baby. You can only get 1 hamper per week. Since I found that out I've been donating a box of size 3's (I believe 144 diapers) every month, and encouraging my friends to do the same. $30 a month won't kill us, and I bet those diapers are a huge help to the moms out there that need them.

Just wanted to share from the flip side of the recession, and point out something small that people can do to help. (Plus, if you're like me, you just cringe at the thought of surviving for a week on 6 diapers)

May 27, 2009 | Unregistered CommenterNicole

What a fabulous post. I've tried to explain what is going on to my son, even telling him that some day he'll study this time period in school. I really look forward to checking out all these informative links!

And congrats on your blogaversary! I hope to meet you (and Amy) at BlogHER!
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I see a lot of old world finance advice being distributed here. If you are thinking of teaching kids about money, well, you should first try and make it relevant.

November 26, 2009 | Unregistered CommenterAjeet

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