Talking to your children about the economy and financial fears

In times of 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.

Most U.S. adults (87%) report that the rise in prices of everyday items due to inflation is a top source of stress, according to APA’s March 2022 Stress in America survey. Throughout the COVID-19 pandemic, households with children have consistently fared worse than households without children. Adults living with children have reportedopens in new window more difficulty paying daily household expenses, providing adequate food for their family, and have been less secure in their housing payments compared to other households, according to a 2022 Kaiser Family Foundation analysis of federal data.

While children are resilient, financial worries can have a devastating long-term impact on the younger members of a household. When times get tough financially, researchopens in new window shows, families can enter a downward spiral. 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.

While open communication between parents and children is the foundation of a healthy relationship, parents shouldn't overburden their kids with their financial concerns. It’s important to:

• 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. Young children may interpret the situation as more dire than it actually is, so make sure to address any fears they may have. 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 financial worries can influence a child’s interpretation of the situation. Younger children may overhear statements such as “We’re headed to the poor house,” or “That vacation broke the bank,” 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 it 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, as well as wants versus needs. 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. 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.

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

• Tips about managing your stress in tough economic times
• Resilience guide for parents and teachers