Talking finances with kids
"When they decide what they want to do with their lives, I'll explain what my lifestyle is and what I earn to achieve it so they can match their career and lifestyle goals appropriately."
4. Let them have a say
After you've had the tough talk, ask them what they think and let them express their thoughts. "Listen to them, accept their feelings and empathize," Gallo says. "Then put your heads together and decide how you'll work together to tighten your belts."
Instead of saying, "We can't do that anymore," let kids have opportunities to decide how they can economize, Leitz says. "Don't make it about what they can't have, make it about choices they can have."
You can also offer choices for everyday decisions, based on their age. Say you have to reduce their lunch money. Or, tell younger kids they'll have to bring lunch from home, but make it fun by asking what favorites they want and have them create menus.
"For teenagers, say you can no longer pay for greasy cheeseburgers, but you'll help them buy what they want to take to school," Leitz says. "Or if they have a job, suggest they use their earnings for any school lunches they want."
5. Explain money doesn't grow on trees
Whether you feel you've spoiled your kids isn't an issue, but making them understand that money doesn't just appear is. Explaining how money is earned and spent may be too much for kids to digest during the "tough times" sit-down, but it's pervasive enough an issue for a routine discussion.
Leitz used one opportunity -- when her daughter finished a chore and wanted the money immediately -- to explain that because she didn't get a paycheck till Friday, neither would her daughter. Leitz admits she has spoiled her kids, but she has been candid about what each purchase costs.
"Now, given what's going on, I say, 'I'm not going to make a big purchase like that, and here's why,'" Leitz says.
With a cell-phone plan, she explains how much of a child's pay from working a part-time job or doing chores would match up against the monthly fees. "When they realize their phone costs six hours of allowance, it puts it into perspective," Leitz says.
6. Ask them to help out
Now is the time to ask your kids to help reduce their expenses and save more of their money. Gallo recommends asking kids for their money-saving ideas. "They often come up with good cost-cutters, like washing the car or doing the gardening themselves," she says.
Also consider having a regular "family money night." Pick a regular time slot to discuss all financial issues from planning holiday gift-giving to what credit-card charges to make. All these decisions involve the kids. So increasing their awareness level will make them better understand why you keep saying, "We can't afford it."
Even in these tough financial times, it's a great opportunity to teach your kids about the values -- and limits -- of money.
"Parents used to put off money talks, saying, 'I'll do it when they're older.' But now it's a necessity," Gallo says.