How much do children really need to know about the family's financial situation?

"As parents, we have to change our mindset and culture around saving, debt and money." (MoMo Productions/Getty Images)
"As parents, we have to change our mindset and culture around saving, debt and money." (MoMo Productions/Getty Images)

Raising children is tough, raising children in lockdown during the Covid-19 pandemic is unchartered territory. 

This has prompted parents to speak to their children more frequently about the dos and don'ts around their safety. 

But since the pandemic has also impacted our finances in a big way, we should now start communicating as freely with our children around money. 

"As a mother and a debt counsellor, I know the importance of maintaining open lines of communication on everything – including money," says the Managing Director of National Debt Advisors, Charnel Ernstzen. 

However, the focus should always be on how it affects them in the home and their lives. 

They don't need to know every detail of our earnings – but they need to know the overall financial situation.

Here are a few tips provided by the National Debt Advisors for dealing with children and money: 

Don't be reluctant to discuss financial issues with children

Children are very much aware of what is happening around them. Rather have open, frank discussions about household finances with them, than have them make up scenarios in their head.

Don't sugar-coat things

They don't need to know exactly how much you earn, but they should be made aware of how much money is spent on necessities like the roof over their heads, school fees,  food, electricity and transport. 

Let them know how much debt needs to be paid. If the household is struggling, tell them about it, so that they too can change their lifestyle and mindset  - and try and help the situation. 

Don't underestimate your children's intelligence

The gravity of Covid-19 and the subsequent lockdown is not lost on children. They have been hugely affected too, especially by not attending school.

Trust them to be able to comprehend what you are telling them. Children are clever and learn from what they see. If they can interact via a cellphone, then they can transact via money.

Take them with you when going to banks, ATM's and when you pay with your cards. 

Teach them the difference between wants and needs

Children sometimes have a huge sense of entitlement and are oblivious to what is a necessity that they need  - and a luxury that they want.

It is our jobs as parents to educate them on this, especially in these difficult times where parents need to cut down on luxuries to accommodate basic needs – like food, electricity and transport.

While children are home during lockdown – make differentiating between wants and needs an activity to which they can apply their minds. 

Teach them that cash is king

Not all debt is bad, but debt can spiral out of control very quickly. Encourage your children to avoid becoming over-indebted by saving and paying cash for goods as far as they can.

Don't let children traumatize and torment you with excessive demands 

Don't put yourself into debt to appease a child who makes demands for name-brands items and other unnecessary things. You will end up suffering and having to pay for the consequences, literally.

"Living in an over-indebted household not only causes financial distress, but it also causes emotional distress," explains Ernstzen, who advises that parents set the tone for a money-saving mindset.

"As parents, we have to change our mindset and culture around saving, debt and money on the whole – and we have to encourage our children to do the same."

Submitted by Moeshfieka Botha, Head of Research and Consumer Education at National Debt Advisors.

Do you speak openly to your children about your current financial situation? Share your tips with us! 

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