How to Talk to Your Kids About the Financial Realities of the COVID-19 Crisis

The coronavirus pandemic has created a much bleaker financial reality for millions of Americans. With unemployment at historic levels, families across the nation are being forced to operate with dramatically slashed budgets. Living in a new normal that might require counting every penny, conserving to make things last longer and going without nonessential items entirely can be confusing and unsettling for young children, who may not understand what's happening and why. To help parents guide children through a challenging time, we asked experts about how best to talk with kids about the financial circumstances suddenly facing countless families.

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Though it may sound daunting, being honest is the best approach. "It can be so tempting to shield your children from the stresses of finances and 'adult concerns,'" says personal finance and frugal living blogger Emily Bass, of Savvy Frugal Mom. "But everyone has been impacted by this pandemic, including the kids, so they should understand, at least in part, that things won't be quite the same for a while." In Bass' case, when her husband had to close down his business, the kids were thrilled daddy was suddenly home more. Bass and her husband decided the kids needed to truly understand why. "We explained to our children that having daddy home is great, but it also means the business isn't making as much money. So we will be living on our savings until the business is on solid footing again," Bass says.

It's easier for younger kids to open up when they're relaxed and stress-free, says Leslie Tayne, financial attorney and author of "Life & Debt: A Fresh Approach to Achieving Financial Wellness." Plan to speak with them about your new financial challenges in a place or time they are at ease. "Consider an activity such as a game, coloring, or another engaging activity. Other ideas for activities include Legos or playing with dolls, anything that allows your child to feel free and comfortable," Tayne says. "Sitting young children down for a talk will likely not be as effective."

When you talk with children about new financial circumstances, stay calm. "No matter how old they are, your children will pick up on your energy and emotions," says Lynell Ross, a certified health and wellness coach, and a relationship expert who founded the educational website Zivadream. "If you're fearful, they will be too. Let them know there's nothing to be afraid of, and that you can get through this together."

While it's important for children to have some sense of why their world is changing, you can only take such conversations so far. "Younger children have a limited attention span and ability to understand finances," Tayne says. "Sharing too much can be detrimental. If you notice changes in their sleeping or eating patterns, you'll want to try to understand why and center them back to a place of stability."

Older children hear things, no matter how you try to hide it. "They know something is going on and are very capable of getting information through social networks, the internet, and from watching you," Tayne says. "You'll need to be more transparent and direct — within limits. For example: 'Yes, I'm not working, and things are more complicated. But we'll work through it as a family, and we need to make good decisions now about our spending and focus on what's important.'"

As parents, developing a family finance plan is critical. You can share that plan with your children so they understand what's going on and what to expect. "Will mom or dad be working extra hours to make up lost employment time? Will the family be cutting back on spending, cutting it down to necessities for a while in order to catch up on other bills? Will you need to make even bigger changes as a family in order to catch up? Let your kids know what you plan to do so they can have some peace of mind and not wonder why things are so different," says Bass, of Savvy Frugal Mom.

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Have your children help with developing ideas about how to move forward. "What are they willing to give up to help save money? Are older kids willing to babysit younger ones so parents can pick up more hours at work?" Bass says. "Make decisions together as a family so that the kids have a part in your family's financial recovery."

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Take time to remind your children that you are the constant in their life. Explain that change is inevitable and that this too will come to an end — and change is also likely in the future. "Being able to adapt to changes will help them throughout their life," Tayne says.

Talk to your kids about the importance of cutting back on costs to save money and involve them in the planning that goes into shopping for household goods and essentials. "Go through your pantry and fridge and come up with fun meal ideas that you can make without shopping for more food. Doing so can show how valuable saving money and being frugal can be," Tayne says.

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Now is an ideal time to sit down and share the family budget with your children. "Teach them how a budget works so they can see firsthand what you go through in making choices," says Ross, of Zivadream. "Food, shelter, utilities, insurance come first … When they see the family expenses, they will be more likely to understand when you tell them their new toy, cellphone, backpack, or even clothes aren't in the budget."

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Use this time to explain to your children that running the dishwasher and doing laundry when you have full loads is best. "Discuss how small things such as leaving the water running or the fridge open can add up to a considerable amount of waste in resources and cash over time," Tayne says.

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During this time, do your best to curb emotional spending, which could send the wrong message on how to cope with stress. "After a shopping trip, let your children see the receipt and explain the importance of saving and avoiding impulse purchases, because the cost of running a household is so high," Tayne says. 

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In addition to having honest conversations with children, ask them what they are willing to compromise. "Is it cell service, since they rarely leave the house and can just use Wi-Fi for their phones? Or canceling cable and using streaming services such as Hulu or Netflix, for the time being?" says Liam Flynn, founder and financier of Music Grotto. 

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It can be educational and fun to sit down with your children and search for coupons to apply to family shopping needs, Flynn says. "This teaches them more about finances and how they can conserve their own money."

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When you are talking to kids about your new finances, make sure you explain that it is not all about money. "Focusing on the values behind spending and saving versus the actual figures you're earning will be far more appropriate and helpful for a child," suggests Freya Kuka, financial writer and founder of the personal finance blog Collecting Cents. "Instead of telling your child you earn X amount every year, include your child in the financial goals you wish to reach."

Another way to approach the new family budget — one that may help educate and empower children during this challenging time: "Sit down together and write out all the essential and discretionary expenses your family has in general. Then write out all the expenses you have for each person in the family. Let everyone have a vote on the family discretionary expenses like cable or streaming channels," suggests Paula Langguth Ryan, a Compassionate Mediators communications and conflict consultant specializing in personal finance and relationships. "Majority rules. Once you know your baseline income and expenses, determine what amount each person has for discretionary spending. This is their personal budget, and they get to decide how they want to spend their money. What you think is most important to your children may not be what they think is most important."

Cutting expenses can trigger a sense of failure or hopelessness. At the very least it can be deflating. To counteract such feelings, have your family come up with a name for your family team. "A team name lets everyone know you're all in it together," Langguth Ryan says. "As a team, you can work together to make home-cooked meals, for example, rather than eating out. No more worries about being too exhausted at the end of the day to make this happen when your team works together, with various members doing food prep, assembly, cooking, and cleaning up."

Losing anything can trigger big emotions. "Kids who didn't get to have traditional rites of passage like graduation, prom, school trips, spring sports, or the daily interaction of friends, may experience strong emotions across the spectrum, and you're likely the safest people to rant to," Langguth Ryan says. When big expenses are being cut — private school tuition, expensive lessons, a long-planned summer trip — the negative reaction from children may be big too. "Don't take it personally and don't shut down their process with blame or shame," Langguth Ryan continues. "A simple 'Yes, this completely sucks.' Or 'Yes, I wish we had more savings too so we wouldn't have to cut these things' will go a long way toward unifying you as a family."

Children and young adults will always look to adults, more specifically their parents, as their superheroes, says Flynn, of Music Grotto. Remind them that the family will survive and life will continue. "Just look at our country as a whole. We're finding ways to keep ourselves afloat and secured," Flynn says. "Schools are still finding a way to provide education. Grocery stores are finding a way to provide people with safety and resources. Inspire your children to follow the country's lead and to be positive in the face of adversity."