As the topic of money becomes less taboo, partly due to the global health pandemic, conversations about the M-word are springing up all over the place. One place where we’re seeing more conversations about money take place? At home with our children.

Part of the increase in money conversations with our children came out of necessity as our kids wondered why we’re at home instead of at work, why we have to move out of our apartment, why the family car was taken away, why there will be fewer Christmas gifts, why we’re eating out less, etc.

Although teaching our children healthy personal finance habits may not be at the top of every parent’s mind, the truth is we’re teaching our kids about money even when we don’t think our kids are paying attention. They’re picking up our habits and feelings toward money, just like they picked up our eye color or penchant for reading or rescuing animals.

For example:

• Do you shop around before buying?
• Do you use coupons at the grocery store and proudly share, “I just saved us $17.47!”
• Do you gripe about bills and get calls from debt collectors?
• Have you had to announce that due to unforeseen financial circumstances, this year’s family vacation will be spent in the backyard kiddie pool instead of Disney?

Have you noticed any of these behaviors in yourself? Your partner? Your kids?

Studies: Kids Highly Aware of Family Financial Situation

While parents may not have been great at teaching their kids about money that doesn’t mean our kids weren’t paying attention.

An American Psychological Association study found that only 18 percent of parents believe money is a source of stress for their children, yet 30 percent of children reported they are worried about their family having enough money, and 91 percent of kids reported they know when their parents are experiencing financial stress.

In other words, we don’t always take the time to talk with our children about money, but that doesn’t mean our kids are not thinking about our family’s financial situation.

A 2017 survey by T. Rowe Price found nearly 70 percent of parents reported being reluctant to discuss money with their children; in that same survey, about 23 percent of children reported their parents had discussed money with them.

As parents, we may try to shield our children from what we consider the harshness of growing up and may try to delay teaching our kids about money to protect their innocence. But a study from North Carolina State University found children ages 8 to 17 are highly aware of their parents’ financial issues whether the parents discussed it with them or not.

“If parents aren’t talking with their kids about subjects like family finances or debt, kids are drawing their own conclusions which may not be accurate,” said Dr. Lynsey Romo, the lead author of the study. “Even if parents don’t want to discuss family finances with their children, it may be worthwhile to explain why they don’t want to discuss the topic.”

Bill Fay, a staff writer at Debt.org, agrees failing to talk to your kids about money “isn’t just bad parenting, it’s tantamount to child neglect.”

“Your kids are going to learn how to handle money somewhere,” Fay said. “Isn’t it better they learn it from you than on the street or watching some celebrity on TV?”

How to Talk to Your Kids About Finances

Before you talk to your kids about finances, come up with a plan. Ask yourself: What are some basic attitudes that you would like to pass on to your kids? It’s a lot easier to start formulating a plan for what and how we’ll talk to our kids about money when we know what message we’d like our kids to learn.

1. Age-Appropriate Conversations

If you are unable to hide your emotions about your debt, it may be better to explain what’s going on so your kids understand. Children have a tendency to blame themselves for things, so it may help reassure them to calmly explain the situation. If your behavior is changing, you should let them know why — and tell them it’s not their fault.

For example, if you lost your job, your kids need to understand why you are at home instead of work, but they also need to know that the situation, while difficult, is temporary.

Older children can grasp the consequences of debt. Younger ones may worry that the family is going to be homeless, be without food, or have to move in with weird Uncle Jesse and Aunt Becky. Even worse, they may think it’s all their fault. So be careful not only with what you say but also how you act.

If they’re under 12 years old, your kids don’t need to know all the details, says Clark Howard, the co-author of Clark Smart Parents, Clark Smart Kids. “Don’t tell children 12 and under you’re having trouble paying bills. It could foster a deep sense of insecurity.”

2. Be Honest

Be truthful with your kids about how you got into debt, even if it means admitting that you’ve overspent or failed to pay attention to your bills. If you regret going into debt for your wedding, not saving more for college, or for a down payment on a home, tell your kids. Remind them that parents are not perfect, and everyone makes mistakes.

For example: “Mom and Dad bought more than we should have with our credit cards, which was our mistake. The good news is we’re fixing it, and we need your help.”

Explain to them that the whole family will need to pull together and rein in spending for a while. If you have to put off or curtail some of their pastimes and activities, show them how you are planning to sacrifice as well, for the sake of the family’s fiscal health. You may also want to go over the family budget with them.

With all of your children, remember to focus on the positive. Let them know about any encouraging events or good news concerning your situation, and be careful not to use them as emotional crutches. Don’t speculate on negative outcomes that may or may not occur, e.g. layoffs, foreclosure, repossession of the family car, etc. Tell them that you’ll deal with whatever happens at the appropriate time.

3. Talk Values, Not Just Figures

Use this as an opportunity to hit the reset button on what’s really important in life. Teach your kids that it’s not about the expensive family outings, clothes, toys, and vacations — that the most important things in life are family, friends, good health, and enjoying the simple moments.

Also, use the unwelcome but unavoidable situation as an opportunity to stress the most important things in life, which have nothing to do with money.

4. Learn About Money Together

Hard times may also be the best time to teach your children about money, saving, frugality, wants vs. needs, and all the ins and outs of financial responsibility. Older children can also be tutored about the economy at large — business cycles, downturns and slowdowns, what causes a recession, and how the family is part of a much bigger economic picture.

Also, use this as an opportunity to talk to your kids about how credit cards work. Kids often see credit cards as free money mommy or daddy use to buy things. Teach your kids that credit cards represent real money that has to be paid back.

5. Let Your Kids Practice Spending, Saving, and Paying Off Debts

You can demonstrate the concept of debt with younger children by giving them small loans for things that they want but can’t quite afford.

For example, 11-year-old Emily wants to buy a new book for $20. Emily has $5 in her piggy bank. You could loan Emily the $15 and require repayment of $1 a week until the loan is paid off. Missing a payment will entail a penalty of 50 cents each time.

This way, Emily understands why going into debt is ok, but that it is based upon a promise to repay according to a specific timetable, with built-in consequences for default. She also realizes that she will have to trim her expenses in the upcoming weeks if she intends to repay you on schedule — just like you have had to do when paying off a debt of your own.

Mistakes to Avoid

Having a money conversation with your kids can be intimidating and as stressful as having THE sex-talk. Take your time, do some research, and come up with a plan for what you are comfortable sharing with them and what information they do not need to know.

Consider how they might react if you told them about your debt.

• Could it benefit them in some way? What might the negatives be?
• Are they already going through their own personal issues right now — struggling in school or with friends? And if they are, would this add to their stress?
• How resilient is your child?
• Would they understand if you told them you don’t have as much money as you used to so you’re making changes to pay off bills and manage your money better?
• Lastly, what is your current debt situation?

If you’re just making a few cutbacks to try to pay off debt, there may not be any urgency to tell them, since their everyday life may not be affected that drastically. However, if big changes are taking place — if you lost your job or your home is being foreclosed upon — they may need to know so they can be prepared.

Kids need stability and routine, so if that gets taken away, they should be reassured that everything is going to be okay.

Other examples of inappropriate money conversations with kids include:

• Making your children answer the phone when creditors or bill collectors call
• Asking them to lie about the family’s financial situation
• Using your child in an argument with a spouse or ex-spouse about money
• Asking a teenager to borrow money
• Asking your children to make your financial decisions
• Asking your children to keep financial secrets from your partner or ex
• Using your child to vent about your stress rather than explaining things to them