Author Offers Tips On Explaining Economy To Kids
MELISSA BLOCK, host:
So what should we tell our children about economic hard times? How honest should we be? Janet Bodnar joins us to offer some advice. She's the author of Raising Money Smart Kids and is deputy editor of Kiplinger's Personal Finance Magazine. Thanks for coming in.
Ms. JANET BODNAR (Author, Raising Money Smart Kids, Deputy Editor, Kiplinger's Personal Finance Magazine): Oh, my pleasure.
BLOCK: Let's start with high school aged kids. We just heard...
Ms. BODNAR: Right.
BLOCK: Some of them discussing kind of big questions but at a household level, what's the best approach for explaining household finance, a shrunken budget to teenagers?
Ms. BODNAR: I think that with any kids, you want to be honest with them but you don't want to overload them with information. And certainly with younger kids, you want to be reassuring. Now for teenagers, obviously they are fairly sophisticated and you don't have to give them a rundown of your balance sheet, dollars and cents, because they don't want or need to know that. But if you're going to - if your finances have been affected by the financial situation that's going on, if you're facing a layoff, that sort of thing you can be fairly honest with them that, you know, there are maybe some changes in the household, they're not going to be asking for as much stuff this holiday season perhaps. Or if you are going to be out of work and you're going to be looking for another job, you can be forthright with them about how are going to go about finding another job. Very practical, again, not overloading them with information. But, you know, telling them for example, this is teenagers now that you would be eligible for unemployment benefits, which will help to tide you over. Or this is how are you going to go about looking for a new job. You're going to be contacting other people that you know who work for other companies. And it's kind of a lesson in the labor force, a real-life lesson that you're giving them in finding a job and how the labor force functions.
BLOCK: Kids of that age would have very real questions about their college funds.
Ms. BODNAR: Oh, exactly. And you could say well, you know, we have a certain amount of money saved for you. We think it's still going to be available when you go to school. You should be having this discussion even before all this financial crisis came. But you know, what is realistic for your family is, should the kids plan on a public university or college education. Will you have enough to send them to a private school? If they want to go to a private school well they have to make up the difference through college loans and things like that. So, you know, in some ways you can take the situation and use it as an opportunity to discuss other things that you maybe should've been discussing anyway.
BLOCK: How much would the message change for say, middle school age kids?
Ms. BODNAR: I think you're going to ratchet it down a bit. Now certainly if there's - again, you know, a - something like a layoff in the offing, you would want to fill them in on very calmly and reassuringly how you're going to go about finding another job. But you probably wouldn't give them as much information certainly as your high school students were getting as far as what was - what's happening in the overall economy. But you could certainly do it in a simple way. I have a friend who has a 10-year-old daughter. He was very interested in this situation. And I said, well, what did you - how did you explain it to your daughter? And she said, well, we talked about how banking systems work. And that when you put money in a bank, it doesn't just sit there on a shelf, the bank takes the money and lends it out to other people who need it to run their businesses or buy homes and that sort of thing. And what the government is trying to do with its rescue relief plan is to keep that credit flowing to the people who need it. Now that's a very simple explanation and I've written that the ages of eight to 10 are a good time to tell kids about banking because they can sort of understand this little abstract concept about lending money to other people.
BLOCK: And for elementary school age kids, I'm imagining that they may not understand any of the big picture but they will clearly feed on anxiety in the home.
Mr. BODNAR: Definitely. And what parents need to know is that even if you are not talking directly to your kids, it's true that old saying, little pitchers have big ears. They're going to pick up stuff, either headlines that they're seeing on the news or if you and your spouse are discussing some of the issues, they're going to be listening in. So you need to be careful about and cognizant of how you're speaking to them and watch you're saying. Another thing is kids will always take you literally. So if you make a statement like, oh, you know, we're going to go broke, or there goes all our money. And they're thinking, oh my gosh, we're going to be in the streets. So you really need to watch what you say, don't use dark humor in these situations, because kids do think in terms of black and white. And very basic information goes a long way.
BLOCK: Janet Bodnar, thanks for coming in.
Ms. BODNAR: Oh, my pleasure.
BLOCK: Janet Bodnar is the author of Raising Money Smart Kids.
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