How to Raise Children With Financial Confidence – Despite the Loss?
How to explain the new financial situation to children? And how to turn it into an opportunity for financial growth?
After the loss of a parent in the family, financial responsibility usually falls on the surviving parent. This is also a significant change that impacts the educational roles at home - including the important topic of financial education. Suddenly, one has to make all the financial decisions alone, explain the new situation to the children, and prepare them for the future.
However, it is also an opportunity to build, together with the children, a healthy and direct relationship with money, teach them skills that will help them throughout their lives, and provide them with a sense of security and tools to cope with the new reality.
Financial education after a loss: Why is it important?
Children sense changes, even if they are not explicitly told about them. They feel that there is new pressure at home, that new decisions need to be made, and that the adults around them behave differently. When they are not given an explanation about the financial situation, they may turn anxious.
When should we start talking to children about money?
The earlier you start talking to children about money, expenses, and proper financial management, the broader their understanding of the subject will be. Children can develop financial skills at any age, depending on their level of understanding. They are capable of grasping concepts like price comparison, delayed gratification, and dealing with boundaries - just as we all deal with budget constraints.
Additionally, it is advisable for children to become familiar with basic financial concepts, such as current accounts, overdrafts, loans, what a bank is and its role, and later on - understanding what a pay slip is and what rights workers have.
Tips for proper financial education
Use daily opportunities:
The conversation about money surrounds us all the time; we just need to make it a part of our routine, for example:
- When going to the supermarket, bring a shopping list and also compare prices.
- When a child wants us to buy something, instead of automatically saying "yes" or "no," engage in a conversation about the topic and emphasize the difference between a want and a need.
Separate money from love:
It is important to constantly emphasize and clarify that money is not a measure of love or satisfaction. When deciding to set boundaries and not buy something to children, it is important to stress in the same sentence your love to them.
Talk about choices, not difficulties:
There is no need to talk to children about financial difficulties - this may only cause anxiety. Instead, talk about choices, for example: Instead of saying "I don't have money to buy you an expensive toy," it is better to say: "We choose to dedicate our money to things that are more important to us". A conversation about choices and prioritization is relevant at any income level, as money is a limited resource, and we all live within a framework of choices.
Be smart consumers:
It is important to teach children to be aware of marketing techniques that try to influence us as consumers and make us buy more. The goal is to teach them not to get carried away with purchases by being aware of the factors that influence our financial decisions:
- Herd effect: When we see everyone doing something similar, we also want to do it, for example: Buying shoes of an expensive brand or traveling abroad for a vacation. We need to stop and think about what is more appropriate for us and our family.
- Sales: When we see a product's price crossed out with a lower price below it, it makes us think we save money, even if there isn't a real sale (often the price is raised beforehand to give the illusion of a discount). It is always important to check the price at other stores that offer the same product.
- Is the price really low? Sometimes the price of a product seems cheap or expensive depending on the other products around it, for example: A shirt that costs 150 ₪ may seem cheap next to shirts that cost 300 ₪, but expensive compared to shirts priced at 80 ₪. This is a marketing technique - placing expensive products next to the one they want us to buy, so it appears to be a good deal.
Smart consumerism:
It is important to teach children about basic rights related to smart consumerism, for example: How to check a bill, what to do if there is an error, and what our rights are as consumers.
Practical tools
Allowance: An excellent tool to practice financial education with children - it is given once a month at a fixed time (like a salary), it is not dependent on household chores (it is not payment for work), and it helps set a clear goal in advance (for what the money is intended). Additionally, defining a limited budget forces us to make choices and set priorities, for example: Skipping one outing with friends to save money.
Savings with a purpose: The best way to teach children to save money is to set a goal that is slightly beyond their reach and participate in it. For example, if children want to purchase an expensive item, such as a phone that costs 4,000 ₪, you can suggest that they save half the amount themselves, and you will cover the other half.
Investment in the future
After a loss, many parents feel that the responsibility for their children's financial education is a heavy burden. However, this is actually one of the areas where they can feel in control and provide their children with real tools for the future. The more you talk to your children about money and involve them in the thought processes, the more prepared they will be for independent coping in the future - and this is a gift you give them for life.
This article is based on a lecture on financial education for children by Keren Lev, a family finance management expert from SMART Pilat, as part of the "Alumot Or" project. The information is suitable for parents of children of all ages.