How to explain the Global Financial Crisis to your kids!
With more and more Australian workers losing their jobs or having to cut back on their working hours, children across the country are starting to question why their parents are at home more often.
On the other side of the coin, according to Greg Smith, founder of Australia’s premier children’s financial literacy company, Kids Money, “Parents are also looking for ways to explain the Global Financial Crisis to their children. But more importantly they also want to know how to tell their children why they can't afford something anymore or worse still that mum and or dad have lost their job.”
For children aged between 5 – 12 the world has been prosperous place for all their life. Thanks to the world economic boom all they know of is a world that was simply if they asked for something they got it. Now in these, dare we say recessionary times, a new set of rules are going to come into play and for the first time mum and dad may have to say no!
The challenge for parents is therefore to manage these changes properly without instilling fear into their children and causing them to have negative views of money.
Smith believes that this is actually a great time to teach children lifelong money skills and recommends that Parents be on the front foot in explaining what is going on in the world around them and more importantly with the family finances:
Some of his advice includes:
1. Talk openly about money in your home - it is not a taboo subject. Start by sharing how you budget and allocate your income to pay for the bills with your children. Show them how they can do this too with their pocket money by breaking it into four areas. Some for day to day living, some for giving to charities, some for saving and some for longer term investing.
2. Don’t hide the fact that you have lost your job. Be honest and tell them up front. Explain to your children that sometimes companies simply can't afford to employ the people who work for them. Let them know that mum and dad are doing everything they can to find a new company to work for and it may take a bit of time. In the interim, take a positive approach to this and enjoy the time you have with your kids. Instead of spending money on them to feel good, take them to the park and enjoy one on one time.
3. Explain the Global Financial Crisis in their terms. For the younger ones, use the analogy of a party to explain the GFC. Tell them it is just like being at a friends birthday party where everyone is having a good time right up until someone gets too excited and slips over and breaks their arm causing the party to end early and everyone going home feeling sad. Reassure them that just like their friends arm will mend over time with some care and a bit less silliness so too will the money world.
4. Don’t say we can't afford it – never fill your child with negative issues around money. Take the positive approach and show them how to save up for something. Smith recommends using his smart four compartment money box called the Money-Ed-Box together with the Kids Money Savings Goal poster to show tangible and visual methods of saving. Here children cut out a picture of what they are saving for and stick it on the poster. Then they physically track how their savings are growing by counting the notes and coins in their Money-Ed-Box – all the while charting their progress by colouring in the milestone sections on the Savings Goal poster.
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