Updated on 12.05.14

Should You Tell Your Kids About Your Debt?

Daughter looking at mom

When and how should you tell your kids that your family is in debt? Photo: Gordon

Parenting is a no easy task, as you already know. There is no playbook or instruction manual to tell you the best way to handle a given situation.

One tough parenting dilemma and highly debated issue is whether your children should know when your family is struggling with debt.

There are many schools of thought on this topic, and no clear-cut answer. Many feel that money issues, especially where you’re financially struggling, are an adult issue that children shouldn’t need to worry about. Children are helpless in the situation and need to feel a sense of security, so telling them about your financial problems may only make matters worse by scaring them or confusing them.

On the other hand, it is important to teach children about money. And chances are, if you are experiencing stress and anxiety from your debt and lack of financial security, your kids are already picking up on it. In fact, an American Psychological Association survey concluded that 91% of children say they know when their parents are experiencing stress.

And while 30% of youths say they’re worried about their family having enough money, according to that same survey, only 18% of parents believe that money is a source of stress for their children. Parents are clearly not picking up on how money-minded some of their kids really are, or they’re in denial.

Children as young as five years old have shown an increase in depression and anxiety stemming from their parents’ unemployment and financial problems, according to the BBC. Another study revealed that kids whose families endured financial hardships during their adolescence became parents earlier than their peers and also treated their children more harshly.

Deciding whether or not to tell your children about your money struggles can be a confusing question. Before you determine what’s best for your particular child and your unique situation, here are some things to consider.

When to Tell Your Kids About Debt

Whether or not you should tell your children about your debt really depends on three factors: you, your kids, and the severity of the situation.

If you are unable to hide your emotions about your debt, it may be better to explain what’s going on so your kids understand. Children have a tendency to blame themselves for things, so it may help reassure them to calmly explain the situation. If your behavior is changing, you should let them know why — and tell them it’s not their fault.

The second factor in determining if and when you should tell your kids comes down to the kids themselves.

Age matters when deciding whether — and how much — your kids should know about your debt. In an interview with NPR, personal finance contributor Michelle Singletary says children six and younger probably aren’t going to understand what’s going on.

If they’re under 12 years old, your kids don’t need to know all the details, according to Debt.org. Clark Howard, co-author of Clark Smart Parents, Clark Smart Kids, agrees with that age. Howard told Good Housekeeping, “Don’t tell them [children 12 and under] you’re having trouble paying bills. It could foster a deep sense of insecurity.”

However, age aside, it really depends on your children themselves.

You know your children better than anyone. Consider how they might react if you told them about your debt. Could it benefit them in some way? What might the negatives be?

Are they already going through their own personal issues right now — struggling in school or with friends? And if they are, would this add to their stress? How resilient is your child? Would they understand if you told them you don’t have as much money as you used to so you’re making changes to pay off bills and manage your money better?

Lastly, what is your current debt situation? If you’re just making a few cutbacks to try to pay off debt, there may not be any urgency to tell them, since their everyday life may not be affected that drastically.

However, if big changes are taking place — for example, if you lost your job or your home is being foreclosed upon — they may need to know so they can be prepared. Kids need stability and routine, so if that gets taken away, they should be reassured that everything is going to be okay.

Telling your children about your debt and money problems can have both positive and negative effects. Consider these when determining whether you should tell your children about your debt, and how much to tell them if so.

Positive Impacts of Telling Children About Debt

Clear up confusion: Not telling your kids can do more harm than good in some cases, because they may sense your discomfort about debt but not understand it, according to Debt.org. If you’re able to productively inform them about what’s going on, they may not feel as confused.

Discussing money with children can eliminate their misconceptions about finance. For example, if they overhear you talking about money issues, they may let their minds wander and imagine the worst for your family. A study from North Carolina State University concluded that school-aged children (ages 8 to 17) are highly aware of their parents’ financial issues, whether their parents talked to them about money or not.

A teachable moment: This is a perfect time for your children to learn a valuable lesson about money. You can use the experience to teach them about saving, bills, and managing money better.

If your kids are younger, this is an opportunity to teach them about saving their money and the value of a dollar. If they’re older, discuss budgeting, living within your means, and not abusing credit; you can even enlist their help with finding ways to cut costs around the house.

Talk to your teens about the effect of debt from student loans. You can express how debt is a stressful thing, and that they should try to do whatever they can to avoid overwhelming student loan debt. It may be great motivation for them to start applying for scholarships or exploring less expensive schools.

Priority adjustments: Your entire family can hit the reset button on what’s really important in life. Sometimes it takes a situation like this for you to truly realize what matters most. Teach your kids that it’s not about the expensive family outings, clothes, toys, and vacations — that the most important things in life are family, friends, good health, and enjoying the simple moments.

This lesson is better taught through your actions than your words. Show them you still have a positive attitude and that you can still have fun together as a family to prove that you don’t need a lot of money to be happy.

Negative Impacts of Telling Children About Debt

Anxiety: Children are often left feeling “anxious and insecure” when learning about financial hardships, financial psychologist Brad Klonts told Fox Business.

Common emotions associated with financial problems can include anxiety, blame, fear, resentment, and confusion. No matter how well you explain yourself and how reassuring you are, some of these feelings can be unavoidable.

Monitor your child’s behavior. If there are changes in behavior, sleep, or appetite, or your child begins to have nightmares or avoid specific people or situations, it could be a sign of high stress that should be addressed with a licensed mental health professional.

They may blame themselves: Children often blame themselves for their parents’ problems. They may feel like the debt is their fault or they may misconstrue your current stress as disappointment with them.

That’s why if you do tell them, you need to let them know it has nothing to do with anything they did. Still, your reassurances may not be enough to keep them from blaming themselves on some level.

Overactive imaginations: Kids have active imaginations. If you start talking to them about your debt, they could interpret the situation as much worse than it really is. They may imagine that you’ll all be forced from your home, or that mom and dad will get divorced, or that you won’t be able to afford basic needs such as food or housing. And they may not tell you about these fears.

Privacy: Depending on their age, children often don’t know how to keep a secret. Telling them about debt could result in other family members, teachers, or your children’s friends and families knowing about it as well.

If You Do Tell Your Kids…

Avoid talking about your debt in a stress-filled, emotional way. And perhaps more important than knowing how to involve your children with your debt is knowing how not to involve them. Here are some red flags that signal inappropriate behavior:

  • Making your children answer the phone when creditors or bill collectors call
  • Asking them to lie about the family’s financial situation
  • Using your child in an argument with a spouse or ex-spouse about money
  • Asking a teenager to borrow money
  • Asking your children to make your financial decisions
  • Using your child to vent about your stress rather than explaining things to them

Let them know it’s not their fault. Children have a tendency to internalize their parents’ issues, according to the APA. This means they may take on the burden themselves.

Clear up any misunderstandings. The American Psychological Association advises to be mindful of how you phrase things. Money can be a complicated topic for anyone, especially children.

Spare the details. Depending on the situation, your children don’t need to know every last detail. They may just need to know that you are making some changes — that you might need to tighten your belt with spending and that you’re going to try to save more money. They don’t need to know that you drained your savings account and have X dollars in credit card debt.

Reassure them, and keep calm. If you decide to tell your children, think before you speak. Eliminate any words or explanations that can provoke fear, anger, or insecurity. Let them know that this is what’s going on, but everything is going to be okay. KidsHealth.org recommends keeping explanations brief.

Create a dialogue. One benefit of telling your kids is that they may now feel like they can express their fears or other emotions associated with what’s going on. Encourage them to express their feelings. You may be able to help clear up some things that they didn’t even need to be worried about. They may have questions for you, so be patient and answer what’s on their mind.

Make it a point to continue to do fun things as a family. While you aren’t able to go out shopping for toys or clothes or do pricey excursions, it absolutely doesn’t mean you have to stop having fun together. Brainstorm free or cheap activities you can do together as a family. Check out free events at your local library, community center, or festivals and free concerts happening in your city. Explore parks, forest preserves, free admission days at area museums, or other free attractions. Instead of getting fast food or going out to eat, plan meals that kids can be a part of and help you make. Most kids really just want your attention and time more than they want you to spend money on them.

Watch for symptoms of stress. The APA recommends talking to a licensed mental health professional if you’re unsure of how to speak to your children about money, or if they’re experiencing any type of stress or anxiety from this. Keep in mind activities to promote good mental health such as letting them talk about their feelings, encouraging them to write in a journal, getting proper nutrition and exercise, getting enough sleep, maintaining a routine and schedule, reducing other stress-inducing activities (e.g., letting your children watch the news or visiting with family members who are constantly arguing), and having fun.

Be mindful when your kids are around. “You shouldn’t have adult conversations when your kids are around and then try to convince yourself they’re not listening or don’t understand,” psychologist Marlin S. Potash told Woman’s Day.

Let them help. There are conflicting arguments about how much to involve kids in the solution to your debt management. Some say it’s fine for teenage children to pitch in from their part-time job, while others feel that’s a mistake. But if your child expresses an interest in helping, they can participate in other ways. For example, they can help clean out their closets, the attic, and the garage to hold a family yard sale, the proceeds of which you can put toward the debt. Older kids can research free, fun things for the family to do or clip coupons for the grocery store.

No mixed messages. Married parents should discuss and agree on how the issue should be handled prior to speaking to their children to make sure they’re on the same page.

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