2020 has been a year like no other. Almost no family across the world has been unaffected, either directly or indirectly by the unprecedented challenges posed by a global pandemic, multiple lockdowns, and ongoing restrictions. One area that many families have found themselves in particular difficulties is finances. For many families, being on furlough or being without work unexpectedly has created a real strain on their finances. This is compounded by the holiday season, and a general desire to make what will inevitably be an unusual and in some ways distressing Christmas ‘more special’ by buying more gifts. This article will look at ways to explain the realities of finances to children, without scaring them or causing undue distress.

Just as there is no ‘easy’ way to have financial problems, there is no easy way to explain them to children. Parents will often try to ‘shelter’ their children and decide to hide money problems from them. This is understandable, as the child cannot do anything about the situation, and parents will want to spare them the worry. However, this secrecy may cause issues for the family down the line and some experts suggest parents should talk more openly about their family’s money situation. While it is important not to scare or worry children, keeping them in the dark might lead to further stress or strain down the line. Just like adults, children can make better decisions if they have a better understanding of the situation.

For younger children, parents should remember that you are not ‘depriving’ your child by setting limits and living within your means. While the newest toys and designer clothing seems very important, they are much less important than healthy food, heat or electricity in your home. Explaining to your child that they cannot have a new toy now – but to wait until a holiday or birthday is a good way to teach them to delay gratification. This will make each new gift more special and help to emphasise the value of the item.

For slightly older children, parents should empathise and relate to their child’s situation. Tell them that there are things you would like to have but cannot afford right now. Do not say this in a way that the child may blame themselves (for example saying ‘if I didn’t have to buy you a new bicycle, I’d…’). Instead, you can both set goals to save for and celebrate together when you meet them. Setting limits and rules and sticking to them for money is a good way to encourage good financial behaviour going forward.

If children understand that money is not limitless, their expectations will be more in line with what is realistic, particularly for your family. This can naturally be more difficult under certain circumstances, for example at Christmas. A child might not understand why their family can or cannot afford a particular toy, they might struggle to comprehend why some children get more toys or gifts than others. Exactly how your family deals with this issue is up to you as a parent as often traditions are unique to each family. However, you might want to explain that every families situation is different and use it as an opportunity to discuss the importance of spending time together and how fortunate you are that you are able to do that.  As children grow up it is much more likely that it will be the trip to the park for a jump in muddy puddles or the rolling down the hill in the snow rather than how many presents they got that they remember.

Even if you are not facing difficulties, children are remarkably preceptive and will soon understand signs of wealth or poverty. They may ask, for example why they (or their classmates) get free school meals. They may wonder why some children’s clothes or school supplies are not as good as others. While primary school may be a little early to have a conversation about post-industrial capitalism, it is a good idea to speak about some of the realities that your child will encounter. Even if you are not trying to explain your own circumstances, taking the chance to talk about money, budgeting, poverty and unfairness is an excellent way to foster empathy. This way, you can encourage your child to not flaunt any expensive gifts, and to not tease those less fortunate than themselves. Instead, they can be taught the value of sharing and importance of non-financial things.

Teaching your child the value of money early can be useful as well. Many parents will shy away from sharing particular details that a child may innocently ask – how much dad makes a month, how much does mummy have in the saving account, or if granny is ‘rich’. These simple questions might be rude if an adult asked – but a child has no concept of the societal aspect of wealth. They do not know why someone might not want to discuss their salary. Parents should share as much as they think is appropriate, but also explain why someone might want to keep those things private.

Teaching children simple monetary concepts at appropriate ages can help them to understand value later in life. As early as 5 or 6, children begin to start to understand simple things like identifying different coins and counting change. This presents an excellent opportunity to talk to them about the value of money and to teach them that it does not grow on trees (or appear like magic from an ATM).

Giving them a small amount of money, particularly tied to suitable chores can help them to understand the relationship between work and money. Many parents will be tempted to force children to save their money. However, it is also important to recognise that if they never spend even a little of ‘their’ money they will not necessarily understand the true value of it. Having a savings account when they turn 18 is good, but if they have no concept of costs it may not last as long as you would hope. On the other hand, once a child has experienced how quickly shopping can drain an account they might ration or save for more valuable purchases.

One very important thing that you can do as a parent is not get caught up in ‘competition’ with other families. No one benefits from parents putting immense pressure on themselves to buy all of the newest, most expensive items (aside from the manufacturers). It can be difficult to ignore it when your child’s friend has something that your child wants, but you cannot afford. Just remember that you do not know the reality of their family’s situation. Comparing yourself and stressing over not being ‘good enough’ because you cannot afford a toy or trip does no one any good. Focus on meeting the basic needs of your children, and teaching them to be financially literate. They may complain about not getting what they want, but you are setting them up for success in the future.

If you are struggling with talking to your child about finances or money issues, you can always get parenting support on the Parenting NI Supportline on 0808 8010 722.