Kids and the Economy

The economic downturn has affected us all. Chances are you know people who recently lost their jobs, or have seen a foreclosure sign posted at a house down the street. Maybe the sobering news has forced you to take a serious look at how you can reduce your own family's expenses.


While it's definitely a stressful time for many Bay Area parents, it's also a confusing time for children who don't understand issues such as subprime mortgages and economic stimulus plans. As parents, we try to protect our children from anything negative, yet kids can get worried and imagine the worst when they hear their parents discussing financial woes.


Psychologists and financial experts say it's important to talk to your children about the recession and the economic impact it has on your family but to do so in a way that won't scare them.


“Children are looking for reassurance,” says Dr. Mardi Horowitz, president of the San Francisco Center for Psychoanalysis and director of the Center on Stress and Personality at the Langley Porter Psychiatric Institute at UCSF. “They don't care about whether or not the Dow Jones is going up or down but they do want to know what the economic crisis means to them.”


Be Honest but Reassuring


If your family is making budget cuts or having financial difficulties, don't go into a lengthy discussion about how Daddy is worried about losing his job. Instead, keep the information simple and straightforward, and reassure your child against unrealistic fears.


“Listen to what your children want to know and answer questions by putting the information in a context they can understand,” Horowitz says. “Answer their questions with optimism and confidence – a child's fear of the unknown is often scarier than the facts.”


For parents who are part of the population being called the “working worried,” Horowitz suggests explaining family budget cuts by saying, ‘Mom and Dad have less money to spend right now so we won't be eating out or going to movies as often, but you will always have food, shelter and our love.”


Emphasize to your child that the economic struggles facing our country are temporary and that your family is resourceful and will be able to get through the hard times together.


“It's not hiding the reality of the recession, but rather presenting the information in a way that shows your children optimism,” Horowitz says. “When kids see their parents struggle honestly with challenges and work to overcome them, they become better equipped to cope with their own inevitable challenges in life. Remember the phrase: This too shall pass.”


Too Much Information


If it seems you're being inundated with dire economic news and projections every time you turn on the television or radio or log on to the Internet, Dr. Shoshana Bennett, a Danville-based licensed psychologist, suggests taking a break from the media.


“It's not healthy to constantly surround ourselves with news that creates stress and anxiety,” Bennett says. “Turn off the news tonight and do something fun with your family instead.”


In an economic downturn, family activities and parent date nights are often the first casualties, Bennett says.


“This is a big mistake because you need to have fun now more than ever,” she says. “It's fine to cut back on excess spending but don't cut out family time or time alone with your spouse. Family game nights and taking a walk after work with your spouse are ways to stay connected and have fun with your loved ones without spending money.”


The Opportunity to Educate


With April being Financial Literacy Month, the current economy can also be a perfect way to begin teaching your children important lessons about money.


“The recession can be a great conversation starter for parents who may haven't had the money talk with their children,” says Jason Alderman, director of Financial Education Programs for VISA in San Francisco and the father of two children, ages 5 and 9.


Alderman has used VISA's free Web site,, to talk about money issues with his own children. The site features games including financial football and an allowance calculator.


“When your child wants to buy something and you don't have the money, don't just tell them the item costs too much,” Alderman says. “Take it a step further and teach your kids the importance of money by illustrating how much allowance must be saved or hours worked to purchase the item they want.”


Regular trips to the grocery store can also provide an opportunity to teach kids about money.


“Let your kids be part of the decision-making process,” Alderman says. “Explain what your budget is for the shopping trip and encourage them to make price comparisons. If they want to put numerous items in the cart, say ‘If we get this, then we won't be able to buy this.' That also makes it so you aren't the arbitrary ‘no' person.”


Another way that children learn about money is by watching their parents work and seeing what it takes to generate an income. Since April 23 is National Take Our Daughters and Sons to Work Day (, consider taking your child to your place of employment for part of the day.


Erica Sandberg, a San Francisco-based personal finance expert and author of Expecting Money: The Essential Financial Plan for New and Growing Families, says it's important to talk to children about the work-income connection and to encourage kids to think like entrepreneurs.


“My family recently had a garage sale and my 6-year-old daughter sold the stuffed animals that she no longer played with,” Sandberg says. “She also loves to do art projects and I've suggested she try to sell her work at a school craft fair.”


Sandberg has also learned that reading to her daughter can provide an opening for talking about the economy.


“My daughter enjoys Beverly Cleary's books and we recently read Ramona and Her Father, which talks about Ramona's father losing his job,” Sandberg says. “It was a great way to begin a conversation about what's going on in the economy and to answer some of my daughter's questions. She had heard about a friend's dad who was laid off at his job and wanted to know what it meant and if the family would be okay.”


Linda Childers is a calendar editor at Bay Area Parent and a mom of a 10-year-old son.




Additional Resources


  • The Berenstain Bears Trouble with Money – This is a good book for ages 4-8 about the differences between spendthrifts and misers, by Stan Berenstain and Jan Berenstain.
  •  The Millionaire Kids Club – These books by financial literacy expert Susan Beacham and New York Times bestselling author Lynnette Khalfani Cox teach kids ages 5-12 about the four things they can do with money: save, spend, donate and invest. Order at
  • – This Web site, designed for kids in grades 3-6, shows parents how to use popular children's books to teach kids about money.
  • – Log on here to teach children about savings, checking, interest and other bank services.


– Compiled by Linda Childers