How your money struggles affect your kids

While it is good, and even encouraged, that you share your money lessons with your children and involve them in the family’s financial planning, some of us might unknowingly go overboard. When this happens, the sharing no longer benefits our children but could instead ultimately harm them psychologically.

When children are inappropriately exposed to adult financial problems and conflicts, they are left feeling anxious and insecure.

Brade Klontz, a certified financial planner and psychologist, says parents who regularly cross financial boundaries with their children have a money disorder that he calls “financial incest.” In The Journal of Financial Therapy, 2012, he describes it as “inappropriate involvement of minor children in parental financial matters, including conversing with them about financial stress, and using children as messengers to pass along financial messages between adults”.

Here are some signs you may have a problem:

  • You share all your financial worries with your child, sparing no details. Afterward, you feel a sense of relief, passing on the stress to your child.
  • You use money to control, manipulate or blackmail your children.
  • You use your child as a messenger when you’re in conflict with your spouse or ex-spouse about money issues.
  • You ask your teenager to help make important financial decisions, expect him or her to balance the checkbook or to contribute to household bills.

Why is this a problem?

  • Children feel the weight of the problem on their shoulders
  • But knowing that it is out of their control, the feeling of helplessness will take over
  • Sometimes backlash behaviour can happen when the children cannot find ways to cope with the financial stress. They might even express resentment about how you had put them in this situation.

Steps to take to avoid “financial incest”:

Model responsible money habits

A big part of teaching kids good financial habits is making sure you’re modeling them yourself. Share with your child how you budget for your expenditures and savings. Let your child know what the expectations and norms around money in your family are by setting clear instructions. A few things to try could be:

  • Setting a budget before heading out for a family outing, and sticking to it when you consider where to eat and what activities to partake in, even if that means forgoing a nice meal and a fanciful restaurant.
  • Being open about saving money for things like college funds, emergency funds, vacations or a new car.
  • Model to the kids that many broken things can be fixed rather than resorting to buying a new one right away all the time.
  • Avoiding “retail therapy,” or shopping with the goal of cheering yourself or your child up.
  • Imposing a waiting period to guard against impulsive purchases. Are you still thinking about that pair of shoes a week later?

Tell the truth, but be mindful of how you tell it.

While we try our best to spare our children the worry and hardship, it is important to let them know the situation without going too deep into the details. What we want to do here is to let them know that the family is facing some financial difficulties but assure them that it would be overcome sooner or later. Try to explain in brief but truthful detail about what’s happening and leave time for questions. Try to listen out during these conversations to understand your child’s thoughts and attitudes. Make it a kind, understanding conversation, and listen for clues.

How can one talk about money with kids without hurting them?

As long as you discuss money without blaming your child, and encourage him to offer a solution to the problem in order to resolve it, it will be a win-win situation for both of you.

Here are some examples of what not to do vs what to do when talking to your child about money.

  • Addressing spouse’s poor financial habits

Not to do
“Your mother spends unnecessarily on shoes handbags! How will we ever save for your education?”

To do
Sit as a family and calculate the amount required for education. “We will all have to watch our expenditure and see where we can cut down. We want to be able to pay for your University education.”

  • Financial problems of separation or divorce

Not to do
“You can’t go for the school trip because your dad does not bother enough to contribute. I don’t have enough money!”

To do
“I have a limited income and I need to first spend on the essentials. If both of us try to save more, you can go for the trip next year.”

  • Loss of job

Not to do
“We can’t go on a holiday because you didn’t help me save money while I was still earning! Just accept it!” Hiding the fact from the kid, pretending all is well, and making excuses or blaming them for cutting down on holidays or eating out.

To do
“I am in the process of looking for a higher-paying job. Before then, we will have to cut start saving more if we want to go on a holiday.”

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