May 4, 2020
How to talk to your kids about spending less money right now
Many Canadians are facing financial hardships due to the COVID-19 outbreak and the measures governments around the world have taken to help stop the spread of the virus.
Millions of Canadians have seen their income disrupted through layoffs, salary reductions or the closing of businesses, according to Statistics Canada.
For families with children at home, income disruption has additional consequences. In many cases, parents are having to change their spending habits or cut back on certain things around the home, while explaining to their children why those changes are happening.
Teaching children about money can be a difficult task for some parents. According to a 2017 TD survey, more than nine in 10 Canadian parents (94 per cent) said they are the biggest influence on the development of their children's money skills, but nearly one-third (31 per cent) said they find it hard to broach the subject.
So, to help parents talk to their kids about how their family's financial situation may have changed, we spoke with a pair of senior TD financial advisors about some tips for discussing family finances with your children.
Be open and honest
Even at the best of times, it's not always easy to say no when your kids ask for things, whether it's a new video game or a paid app for their phone. But it may be even harder now if one or both parents aren't working.
"You shouldn't be afraid to be open and honest with your kids when it comes to money," said Kathy Morin, a senior financial advisor for TD in Hamilton, Ontario. "There's no need to frighten them, just let them know that, as a family, you need to spend wisely while we are dealing with the virus situation."
If you've been laid off, lost your job or your business is struggling, you can start off by explaining to your kids that less money is coming into the household, so the family will need to prioritize spending on certain things over others.
Talk to your kids about the difference between "needs" (the must-haves for survival, like a place to live and food to eat) and "wants" (the nice-to-haves, like going out to eat, cool new sneakers and pricey toys). You can explain that right now, you must prioritize paying for the family's needs first.
"Kids are very intuitive and they know when something is wrong," said Pamela Byron, a senior TD financial advisor in Simcoe, Ontario. "Talk truthfully to your kids without going into great detail and let them know that your spending habits may need to change."
Prepare for some uncomfortable questions
Your kids may ask uncomfortable questions, like “Can we afford to keep our house?" or “When are you going back to work?"
Your kids may be looking for reassurance that everything is going to be alright, and even though no one knows for certain what the future holds, try to answer their questions as honestly and sensitively as you can.
"Remember that it's okay to not have all the answers," said Morin. "You can also get back to them later with answers which will help keep the conversation going."
Keep the conversation age appropriate
You can also have different kinds of conversations depending on how old your kids are.
"Younger kids may only need to understand that your financial situation has changed and there isn't as much money now," Byron said. "But a high school level kid might be able to understand what debt is and that your cash resources are limited."
While younger kids may not understand everything that's happening, they may be picking up that things are different, Byron said.
"Just remember that kids are resilient," said Byron. "It's our responsibility as parents to help them understand that we're doing our best to keep them safe and healthy."