Awesome Article by Guest Author Neal Frankle. He’s a Certified Financial Planner and blogs at Wealth Pilgrim. Neal writes about taking action steps to improve clients’ financial situations and finding balance at the same time.
Financial resiliency is being strong in the face of adversity.
I’m sure you all know about financial adversity. It’s a lesson many of us have learned, especially recently.
If you’ve had to take some financial setbacks, it’s almost impossible to hide it from your children. If they don’t see it in the your budget cuts, they see it on your face.
Left unaddressed, your children may conjure up scenarios far worse than reality. Not only that, their fears may make them susceptible to making poor financial decisions as they age. You don’t want that for them…do you?
You have a great opportunity to give your children (and yourself) the gift of financial resiliency. This is the silver lining you’ve been looking for. Don’t miss out.
The question is, how do you teach this lesson?
My experience tells me there are 5 steps:
1. Honesty
Be honest about what’s going on and what it means. If your income has decreased, tell them about it. Explain how that decrease will impact the family. If you have debt, tell them what you are doing about it. If your children are old enough, use this opportunity. Tell them about debt relief programs and even debt relief scams so they can make good decisions later on.
What are you cutting back? Why? For how long?
Don’t sugar-coat anything. If you have to move; tell them. Believe me, whatever you tell them won’t be as bad as the pictures they have in their minds. It will be a huge relief.
2. Balance
Make sure you paint a balanced picture. Things might be tough now, but are you going to be homeless? Are things going to stay this tight forever? Probably not.
Talk about life-style — not dollars. This will help them keep a clear and balanced understanding.
We’re going to cut back on vacations and eating out.
Whatever it is that you’ve come up with, explain it.
Tell them what isn’t going to change too. Are they going to continue going to the same school? If so, tell them. Are you going to stay in the same house or neighborhood?
Be sure to share the good news too!
In fact, I’d try to tell them one thing that will stay the same for each item that is changing.
3. Action
This is the most important part of the lesson. What are you doing about the situation? Tell them about it. Describe the way you are looking for a new job if you lost your old one. If you are living off of savings for the time being, tell them you saved for situation like this so the family is prepared. Talk about what you’re doing about the situation.
4. Q & A
Allow your kids to ask questions. Some of those questions may be difficult to answer but be as honest as possible without frightening them. Ultimately, they just want to know that the family is going to survive. As long as you can tell them how that’s going to happen, they’ll be happy. Encourage the kids to ask as many questions as they want.
5. Repeat Process
This is an important exercise but you can’t do it just once. Keep the communication lines open. Give progress reports and keep looking for opportunities to answer questions. My suggestion is to do this each month.
Our children learn from watching us. If you want to give your children the gift of financial resilience, display it. Demonstrate that financial setbacks aren’t the end of the world. Show them you have a plan and you have a positive outlook towards the future.
** (Note from Sarah – when you are discussing finances with your kids be sure to be open to and ask for suggestions your kids might have. From personal experience, I know that kids can often be the ones in the family that come up with some of the best ways to save money and make things work out! Be humble enough to let them know what is going on and believe in them enough to allow them to take part in becoming part of the solution!)
Excellent article. I love the focus on action. I also enjoyed looking through some of the posts on Neal’s site – all very well written. Check out his “Who is Neal Frankle?” page – very interesting life story.
Yes Bill – Neal’s story is truly amazing and an awesome testimony to the fact that LIVES can change!
Wow Sarah, that must have been horribly difficult to tell the kids! I’m glad your husband is feeling much better now and your family got stronger, not weaker from the crisis. It sounds like your kids picked up some invaluable life skills as well.
He was finally diagnosed in 2004 so it has been a six year journey for us. He was was out of work for 18 months and the medical bills just kept stacking up. Being honest with my kids was the best thing I ever could have done. I tried to carry it all for awhile but I just made myself very sick. Things changed when I made the decision to take care of me emotionally and physically as well as let them in on the seriousness of what was happening. We are all stronger because of it and we all have a lot more empathy too!
Great points, kids always know something is going on. They overhear more than you think, too. It’s an excellent lesson for kids that many people go through financial setbacks and there’s no shame in it.
This post reminds me of a tragedy that happened in my area last month. The mayor of Coppell was in dire financial straits because she lost her husband to cancer and had huge medical bills. Unfortunately, she never shared this with her daughter and kept up the facade that everything was fine. Once the secret became to big to hide, the mayor killed her daughter and then herself. Obviously this is an extreme example, but it shows that you have to admit the problems to yourself and your family right away.
That is so tragic! I know when my husband was seriously ill it was hard to talk to my children about it. We prayed for courage and open communication daily. It was a process but now my children have a great understanding of finance and they have learned to pitch in and take responsibility in the family too. The great news is that my husband is doing so much better health wise and all $16,000 in medical bills are paid in full! We are stronger as a family and everyone has grown. With courage and communication, hard times can be come some of the best times for strengthening families.