Teaching kids about money and spending
Many Canadians are facing financial hardships due to the pandemic and the subsequent health response measures governments around the world have taken to help stop the spread of the virus.
According to Statistics Canada, Canadians have seen their income disrupted through layoffs, salary reductions, and even the closing of businesses.
For families with children at home, income disruption can have additional consequences. In many cases, parents are having to change their spending habits or cut back on certain purchases for things around the home, while explaining to their children why those changes are happening.
On top of having to manage these financial changes, having to teach children about money can be another challenging task. According to a 2017 TD survey, more than nine in 10 Canadian parents (94 per cent) said they're the biggest influence on the development of their children's money skills – having to teach their kids the value of money, how to save, and how to have good spending habits - but nearly one-third (31 per cent) said they find it hard to broach the subject.
So, to help parents talk to their kids about how their family's financial situation may have changed, a pair of senior TD financial advisors cover some tips for discussing family finances with your children.
Have an open and honest conversation
It's not always easy to say no when your kids ask for things, whether it's a new video game or a paid app for their phone. But it may be even harder now if one or both parents aren't working.
"You shouldn't be afraid to be open and honest with your kids when it comes to money," said Kathy Morin, a senior financial advisor for TD in Hamilton, Ontario. "There's no need to frighten them, just let them know that, as a family, you need to spend wisely while we are dealing with the virus situation."
If you've been laid off, lost your job or your business is struggling, you can start off by explaining to your kids that less money is coming into the household, so the family will need to prioritize spending on certain things over others. This will let you start a dialogue on managing money and what happens when you have less coming in.
It can also be helpful to talk to your kids about the difference between spending "needs" (the must-haves for survival, like a place to live and food to eat) and spending "wants" (the nice-to-haves, like going out to eat, cool new sneakers and pricey toys). You can explain that right now, you must prioritize paying for the family's spending needs first.
"Kids are very intuitive and they know when something is wrong," said Pamela Byron, a senior TD financial advisor in Simcoe, Ontario. "Talk truthfully to your kids without going into great detail and let them know that your spending habits may need to change."
Prepare for some uncomfortable financial questions
Your kids may ask uncomfortable questions, like “Can we afford to keep our house?" or “When are you going back to work?"
Your kids may be looking for reassurance that everything is going to be alright, and even though no one knows for certain what the future holds, try to answer their questions as honestly and sensitively as you can.
"Remember that it's okay to not have all the answers," said Morin. "You can also get back to them later with answers which will help keep the conversation going."
Keep the conversation age appropriate
You can also have different kinds of financial conversations depending on how old your kids are.
"Younger kids may only need to understand that your financial situation has changed and there isn't as much money now," Byron said. "But a high school level kid might be able to understand what debt is and that your cash resources are limited."
While younger kids may not understand everything that's happening, they may be picking up that things are different, Byron said.
"Just remember that kids are resilient," said Byron. "It's our responsibility as parents to help them understand that we're doing our best to keep them safe and healthy."
This content discusses current topics of interest in a general and informational manner only and may not be appropriate in all circumstances. Please ensure that you seek advice personalized for your situation from the appropriate professional, consultant or subject matter expert on the topic of interest to you.