Talking to Your Kids About Tough Economic Times

February 15, 2009

The nation has been facing uncertain economic times for a while now, a fact that has had an impact on many Americans. That means that many families have had to tighten their budgets and cut back on some of their spending. As this occurs, kids may have a tough time understanding why their parents can no longer afford the toys, electronic gadgets, activities or trips that they want. The Virginia Society of CPAs offers this advice on how to address the economy with your children.

Be honest

Children may already sense that parents are dealing with financial problems, so don’t be afraid to be candid about the fact that times are tough and that your family has been affected. In responding to your children’s questions, remember to give an age-appropriate answer. Answers might range from simple reassurance for a kindergartner to a more complicated discussion with a teenager who has been watching the news. Regardless, the message should be that you are doing your best to solve whatever problems the family is facing and that you trust that your situation will improve. 

Set limits

Although children should be reassured that their needs will be met, that doesn’t always mean that they can still have everything they want. This may be a surprise for many kids who have grown up in more prosperous times, so you may need to explain that certain expenditures are no longer possible. While this can be a difficult conversation, the situation can also present a great teaching opportunity. Introduce your children to the idea that there are limits to what any family can spend and help them to understand the choices that adults make in creating a family budget. In fact, you can describe the family budget as a puzzle that must be solved each week. This lesson in everyday economics will serve them well when they someday run their own households.

Get the kids involved

Once you explain your family’s financial limitations to your children, you can invite them to help everyone live within a budget. For example, ask for their ideas on what items should be priorities in the family budget. Challenge them to come up with inexpensive family activities, such as cooking together or going for bike rides, to replace movie nights or other more costly activities. If you involve the kids, they will feel they have made a contribution to the family’s well-being and have a greater sense that the problems facing the family can be solved.

Plan for the future

All of these steps can make it easier to live within a tight budget, but kids will probably still have a wish list of items that they will be disappointed to forgo. Let them know that it might still be possible for them to have what they want. Younger kids may be able to buy a special toy with money they receive for a birthday or holiday, for example. Older kids might be able to get a job. Explain that it may still be possible to have special things, but that patience will be necessary.

Consult your CPA

No matter what kinds of financial challenges your family is facing, remember that your local CPA can help. Your CPA can help you create a budget, consolidate debts or put together a realistic savings plan. Turn to your CPA for advice on all your financial concerns.

The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has 8,300 members who work in public accounting, industry, government and education. The VSCPA is celebrating its Centennial anniversary this year — 100 years of an organized CPA profession and a strong organization uniting and representing CPAs across the Commonwealth. Visit www.vscpa.com/Centennial to learn more about the VSCPA’s Centennial Celebration. For general information, please visit the Press Room on the VSCPA website at www.vscpa.com, e-mail vscpa@vscpa.com or call (800) 733-8272. To search for a CPA in your geographic region, visit www.financialfitness.org and click on "Find a CPA."

© 2009 American Institute of Certified Public Accountants