Should You Share Your Financial Woes With Your Kids

struggling to pay billsWhen Sarah Taylor was struggling to pay bills after buying her first house, her son began to notice that they weren't eating out as often or going shopping and began asking questions. Taylor, a manager at, wasn't sure if she should come clean with her child about her financial struggles or keep him in the dark. "At first I was afraid, even ashamed, of telling him the truth. But then I decided to look at the situation from the outside and realized it could be quite a useful experience for my kid," Taylor said.

Mary Hunt, author of Raising Financially Confident Kids and the founder of Debt Proof Living agrees that it is important to talk with your children about your family's financial situation because otherwise they may interpret the situation to be worse than it is. However, the way that you present the situation can impact their lifelong attitudes towards money.

"As hard as it is, parents need to change their mindset when talking with their children from being an embarrassed parent in debt to being a teacher," Hunt says. She recommends that parents use their current situation as a teaching moment their child to hopefully avoid accumulating debt as a grown up.

But What Should You Tell Your Kids?

relating your debt trouble to childrenHowever, it is not in the parents or especially the child's, best interest to give them the sordid details of the debt. "Parents need to be very careful about sharing money troubles with their kids. They have to walk a fine line in order not to worry their children too much, causing them to feel insecure and anxious," says Carole Lieberman M.D., Psychiatrist. She also recommends taking into account the age and psychological maturity of your children when deciding how much to tell them.

Hunt recommends first explaining debt as a promise to pay someone back with money that you currently don't have. "Put it in terms that they can understand, such as them wanting a toy from the store and then paying back the owner with money they earn from mowing yards. Tell them that after a few weeks that they no longer like the toy anymore and lose their job mowing lawns but still have to pay back the money." Hunts says. Adjust the example to your child's interest and to age so that they can relate the concept to their own experiences.

Once your child understands the concept of debt, explain that you made some bad choices with money and are now living with the consequences of paying back money that you don't have. Hunt cautions parents against telling their children how much money they owe creditors. "How much you owe is an adult sized worry that they don't need to be burdened with," Hunt says. Since many children will worry if they will lose their home or have enough to eat, assure your child that your family will be OK and that they will be taken care of. Encourage your child to ask any questions and answer them honestly based on your child's maturity.

Involve Your Child in Getting the Family on Track

working within your budgetSince paying off your debt will most likely affect your child's lifestyle, involve them in your goals in a positive way. Let them know the areas that your family will be cutting back, such as eating out or any after school lessons that they will have to take a break from. Be sure to point out all of the positive aspects that will not change and all of the things that your family enjoys doing together that doesn't cost any money.

When your child asks to buy something that isn't in the budget, Hunt says that it is important to phrase your answer in way that properly frames your family's value of money. "Instead of saying that we can't afford the toy, tell your child that we are choosing not to buy the toy because you are choosing to spend your money in other ways, such as paying off the debt or saving," Hunt says. "You don't want kids to give money power over their life, but to realize that we think before we spend money."

Taylor found that by reminding her son that even though the family was a on a budget that they could afford many of the things he still enjoyed. Additionally, her son was willing to pitch in and within a year the family got back on track financially. "Our family has become closer and now we know that everything can be bearable if we are together," Taylor says.