Dollars and sense: Talking to your children about the economy

In this time of extreme economic stress, it can be difficult to leave the problems of the economy off the kitchen table. Fears about mortgages, college tuition, retirement, and day-to-day expenses haunt the halls of many family homes.

Children are extremely resilient. However, children are often keenly aware of tension in the household, whether it comes from financial difficulties or other problems. Ninety-one percent of the children participating in APA’s 2010 Stress in America survey reported that they know when their parents are experiencing stress because of their complaining, arguing, and yelling. And parents often underestimate how much their own stress affects their children, the survey found. Nearly half of “tweens” feel sad and 38 percent of teens feel frustrated when their parents are worried, for example. 

And financial worries can have a devastating long-term impact on the younger members of a household. When times get tough, research shows, families can enter a downward spiral.¹ Economic difficulties, such as being unable to pay bills or having to move in with relatives, cause parents’ stress to increase. Parents may then take their frustration out on their children or withdraw altogether. Without parental support, children act out or do poorly in school, setting them up for economic trouble in adulthood.

Once set in motion, the cycle can last for generations. In one study, children whose families faced economic hardship during their adolescence not only became parents themselves earlier than their peers but also treated their own children more harshly.

What You Can Do

While open communication between parents and children is the foundation of a healthy relationship, parents shouldn't overburden their children. You may find these tips helpful: 

• Address problems at age-appropriate levels. What you  tell a younger child about the family’s financial situation should be different than what you tell an adolescent. Because young children may interpret the situation as more dire than it actually is, for example, be sure to address their fears. Older children and teens, who have more exposure to the news, may find it reassuring to discuss their understanding of the economy and its implications for the family.

• Be mindful of how you phrase things. How parents talk about their worries about the financial situation influences a child’s interpretation. Younger children may overhear statements such as “We’re going to the poor house” and take them literally. Talking to your children and asking them for their thoughts and ideas will help clear up any misunderstandings, ease their anxieties, and reduce their stress. 

• Use the financial crisis as an opportunity to manage your children’s expectations about material things. Teach your children how to handle money responsibly, perhaps by setting up their own “savings account” for their pocket money and then letting them pay for small items they want when shopping. Doing so will help them understand the relationship between money and items, and also that it may not be realistic to expect expensive gifts this year. Focusing on the positive and prioritizing what’s important — relationships with family and friends and the family’s health — can also lessen children’s fears and reinforce family values.

Pay attention to signs of distress in your children. Watch for changes in sleep or appetite, nightmares, or avoidance of certain situations or people. Set a good example when it comes to stress-relieving behaviors. Take a family walk or play a board game  after dinner. These inexpensive activities will not only distract you from the news, but also foster bonding.

How a Psychologist Can Help

If you continue to feel overwhelmed, consult with a psychologist or other licensed mental health professional who can help you learn how to talk with your children about the economy. He or she can help you identify problem areas and then develop an action plan for changing them.

Practicing psychologists use a variety of evidence-based treatments -- most commonly therapy -- to help people improve their lives. Psychologists, who have doctoral degrees, receive one of the highest levels of education of any health care professionals. On average, they spend seven years in education and training following their undergraduate degrees. 

Being proactive about managing your family’s stress will help make your home psychologically healthy despite what's happening on Wall Street and Main Street.

Additional Resources

Tips about managing your stress in tough economic times 

Resilience guide for parents and teachers 

Thanks to psychologists David Palmiter, PhD; Mary Alvord, PhD; and Nabil Hassan El Ghoroury, PhD, for their help in developing this article.

Article Sources

¹ Conger, R.D., & Donnellan, M.B. (2007). “An interactionist perspective on the socioeconomic context of human development.” Annual Review of Psychology, 58, 175-199.

² Scaramella, L.V., Neppl, T.K., & et al. (2008). “Consequences of socioeconomic disadvantage across three generations: Parenting behavior and child externalizing problems.” Journal of Family Psychology, 22 (5), 725-733.

Updated October 2011