Talking through money woes with kids

No one in a household is immune from the challenges that stem from a job loss, a massive medical bill or other significant financial stressors.

Where the impact can potentially linger the longest, however, is with the youngest members of the family, who likely have the least understanding of the situation, feel the most powerless and aren't sure where to turn with their feelings.

"Many studies indicate that children are very aware of changes that occur in homes and the related emotions, even from an early age," said David Reynolds, director of product management and competitive intelligence at BOK Financial^®. "Obviously, the ability to comprehend the implications and connections between finances and other factors changes as children get older, but research shows that these types of stress can have much broader impacts on a child's behavior, educational performance and mental health."

Finances weigh heavily

Being a kid today is tough. Pressures related to school, peers, friends, bullying and other social anxieties exist as they always have, but social media elevates the challenges for many. Most pressing across many households, however, is the state of the family's money matters.

The December 2022 American Psychiatric Association's Healthy Minds Monthly Poll found that the leading source of anxiety about the year ahead was personal finances, which was cited by 64% of those polled, up from 58% a year earlier.

The next highest response—general uncertainties around the upcoming year—came in at 55%, little changed from 54% the previous year.

How parents handle financial anxieties is incredibly influential in how their kids' attitudes toward money develop, said Kimberly Bridges, director of financial planning at BOK Financial. She has helped many clients determine the root causes of their adult money challenges.

"Our client conversations regularly reveal that the way adults feel about money is absolutely impacted by the perspectives they experienced as children," she said. "It's important to remember that the way parents expose their kids to money issues in their formative years affects whether they have healthy relationships with money and wealth when they're older."

Sticking to the facts

Most households will experience money-related issues at some point. And they can be upsetting.

For adults, the situation may boil down to determining how to make the mortgage or rent payment, cover the grocery bill, or keep the lights and heat on.

Without an explanation of these new household realities, however, most of what the children see is a change in their family's spending power. What was purchased previously is no longer in the mix.

"Having discussions through such times is very important, but it's critical to focus as much on what's being done to address the situation as it is to present the facts," Reynolds said.

A constructive approach also relies on keeping negative emotions out of the room as much as possible while discussing financial matters. If anxieties are running high, a parent's better choice is to step away until he or she is calmer, Bridges said.

"Emotions are the biggest enemy to a healthy financial life, and if children attach negative, stressful feelings to discussions about money, that will hurt them in the long run," she said. "Usually, a financial decision with an emotional root tends not to be the best decision because it hasn't involved letting the cognitive side of the mind think things through."

Ripple effects

Even if a family has been relatively fortunate on the financial front, children may still have questions around financial challenges.

Thomas Hay, chief operating officer of consumer banking at BOK Financial, learned that when one of his teenage daughters started asking why a friend didn't have a car. Knowing that the friend's family had to endure a couple of rough years while the main breadwinner was jobless, he explained that the ripple effects didn't necessarily stop when the family returned to financial health.

"Something like a job loss can put a family in a situation where they're still trying to dig out three or four years later," Hay said. "So, I described that when you go through a financial setback like that, you have to put off expenses to make up for the shortfall and it may take some time to feel like you're on sound footing again."