If you are living paycheck to paycheck and feeling the stress of debt, or facing other financial difficulties, your financial problems are affecting your children, not just in obvious ways like not having the money to do things you want to do.
How Debt Affects Your Children’s Well-Being
A study by the American Academy of Pediatrics found a connection between total family debt and poor social and emotional well-being in children.
The study found that the type of debt matters, as children whose parents have significant credit card debt and medical debt experience a greater decline in their well-being compared to children whose parents have significant educational or mortgage debt.
This news may be a bit discouraging, but it doesn’t have to be. Just because your financial situation is less than ideal doesn’t automatically mean your children are headed for emotional issues or financial ruin.
If you’re aware of the potential negative impact of your financial problems on your children, you can lessen this impact with some efforts on your part. Here’s how to do it.
Don’t Hide the Facts from Your Children
You may be hesitant to share the negative aspects of your financial situation with your children, but hiding the facts from them will only give them a false impression of reality.
This will also prevent them from learning from your mistakes. A study by T. Rowe Price in 2017 found that 68% of children who were aware of their parents’ bankruptcy considered themselves “money smart” compared to just 30% of children who were unaware.
If your children don’t know what’s going on, it may further exacerbate your financial problems as you might continue to make poor financial decisions out of guilt or trying to maintain appearances.
Be open with your children about your situation and use the opportunity to discuss where you went wrong and what you will do differently. Use your judgment and avoid revealing anything that threatens their sense of security or frightens them.
Involve Them in the Process
If you are taking effective steps to clean up your finances, go beyond just informing your children about the situation and actively involve them in what you are doing.
If you are paying down debt, your children can help you track your journey. Finding ways to celebrate your progress as a family will make things fun. Your children can participate in setting savings goals or finding ways to spend less as a family. When preparing the monthly budget, ask the kids if they have any needs for the upcoming month.
Doing what you can to involve your children in family financial matters will make money a natural part of your conversations, which is an important factor in ensuring your children do not repeat your financial mistakes.
Be Mindful of What You Expose Them To
Parents are the single most influential factor in shaping their children’s financial habits and behaviors, so what you expose them to is more significant than what you formally teach them.
If your children only see you spend excessively, lack self-control, or prioritize your wants over your needs, they will absorb the wrong messages about money. What they hear you say about money is equally important.
Be intentional in showing a healthy attitude towards money and positive financial habits. Let your children see you think through your financial decisions, delay purchases if you can’t afford them, save money, invest, and practice other healthy behaviors.
It’s not a given that your children are doomed financially just because you made financial mistakes. But if you don’t want them to follow in your footsteps, use these tips to help them adopt habits and behaviors that lead to financial success.
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Sources:
American Academy of Pediatrics. “Parental Debt and Children’s Socioemotional Well-Being,” Page 1.
T.
Rowe Price. “T. Rowe Price: Parents Are Likely to Pass Down Good and Bad Financial Habits to Their Kids.”
Source: https://www.thebalancemoney.com/how-your-money-struggles-affect-your-kids-4169721
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