Tips for Answering Your Kids’ Hard Money Questions

In today’s economic environment, chances are you’re reevaluating at least one element of your personal finances. Perhaps recent trade policy changes have you thinking now may be the right time to buy a new car, but relatively higher interest rates have you wondering if you can afford the payments. Or you might be paying closer attention to your grocery bill (and finding ways to shrink it) in light of higher prices.

While choices like these may make sense to grown-ups, they can be pretty confusing for kids. And even if they don’t fully understand what’s going on, they can often pick up on when something feels different.

“Little children can have surprisingly large ears,” says financial therapist and author Maggie Baker. “They often pick up on more than we give them credit for. They’re always listening, absorbing information and processing it.”

That includes when they hear a conversation the adults are having about money in the next room, or a newscast that’s on in the background. It can even be as subtle as noticing that a parent’s emotions change when they open a bill. And that can lead to questions that parents are sometimes unprepared to answer, such as:

• Why aren’t we going on vacation this year?
• Is Mom and/or Dad going to lose their job?
• Why aren’t we buying the things we normally buy?
• Are we going to have to sell our house?
• Why are Mom and/or Dad working more than usual?

Hearing difficult money questions like these from your kids can be heartbreaking, especially if they’re scared or worried. But they can also provide a great opportunity for you to start having important money conversations with your children.

Four tips for answering your kids’ hard money questions

Here are four tips to help you have better money conversations with your kids.

1. Be honest

Even if you’re the most candid of parents, it can be difficult to stick to the truth when your children pose challenging questions. And that’s understandable. As parents we often want to shield our kids from unnecessary anxiety and stress. But sometimes this desire to protect can have the opposite effect.

“Children are very skilled at picking up on discrepancies,” Baker says. “Even if you keep your story straight 100 percent of the time, a child knows when something is amiss. If you tell them that there’s nothing to worry about, but your body language betrays the truth, your child is going to notice, even if they can’t articulate what’s happening.”

That’s why it’s so important to answer your kids’ questions honestly. “The last thing you want is to be caught in a lie, which could destroy your child’s trust in you,” she adds. But keep in mind, that doesn’t mean you have to share every detail.

2. Give age-appropriate answers

Baker advises customizing your conversation based on age.

For kids under 5, Baker recommends being straightforward and comforting and offering only necessary details. A 4-year-old won’t understand the concept of a mortgage, for example, but knows in a limited way what a bank is.

Kids from 5 to 10 are generally “more capable of abstract thought,” she says. For children in this range, you can offer more detail. Ask your child if they have questions as you go, so they understand that this is a discussion and not a lecture.

“And then, of course, teenagers are very capable of understanding the content of what you say,” Baker says. “They’re also more likely to push back and question your message—that’s just what teenagers do. All children, regardless of age, need to understand that what’s happening isn’t their fault, that you have an action plan to make things better and that, at the end of the day, their needs will be taken care of.”

3. Acknowledge your own feelings

While answering your children’s questions, it’s OK to acknowledge your own emotions, Baker says. In fact, it can even help you facilitate a more honest and open discussion, especially with teens.

If you’ve lost your job, for example, you can start by admitting that you’re sad about it. But perhaps follow that by saying you’re also thankful because you’ve got savings to rely on and unemployment benefits to help you get through it.

“Being honest with your child about your emotions as they relate to money, even in challenging times, can help them develop their own healthy relationship with money,” Baker says. “And that’s an important part of everyone’s life.”

4. Reflect on your own relationship with money

You have a unique relationship with money, which was likely forged during your childhood and early adulthood. For example, if the Great Recession (December 2007 through June 2009) was part of your formative years, you might be more frugal and/or debt-averse than someone who grew up during periods of prosperity. Early experiences like these can influence how we talk to our children about money.

Baker says that understanding this will help you regulate your emotions so that your body language will reflect your message.

“Imagine that your child asks you how the family is going to be able to pay the mortgage now that you’ve lost your job,” Baker says. “If you tell them that everything will be all right, that’s all fine and well. But if you say it through a clenched jaw … your child is going to notice. Your non-verbal communication will contradict the verbal message you’re trying to convey.”

Being able to regulate your emotions empowers you to answer their questions truthfully without inadvertently causing them undue stress.

Better money conversations can help set up your kids for success

As parents, it’s our job to keep our children happy, healthy and safe while also preparing them to enter the world as independent, financially literate adults. By having thoughtful conversations with them today (even if it means discussing uncomfortable or difficult money questions that you’d rather avoid), you’ll be taking another step toward this goal.

“A lot of parents find it difficult to have these kinds of conversations,” saysTanya Van Court, founder of Goalsetter, a financial literacy and family finance platform. “One reason is that many of us didn’t receive financial education when we were kids, so we don’t always have the knowledge base to talk about these concepts.”

But here’s the good news: It’s never too late to improve your own financial literacy so that you can pass it on to your kids. One way to do that is by working closely with your Northwestern Mutual financial advisor. Not only can your advisor help ensure your family is on track to meet your financial goals, but they’ll also help educate you about money along the way.