Bankruptcy, and many of the events leading up to it, is a tough scenario to endure no matter what your age. Job loss, foreclosures and an absence of cash are everyday realities for millions of households in Canada — especially given the current economy. But what’s particularly difficult is the task of explaining this reversal of fortunes to your children. The concept of bankruptcy and a change in lifestyle are hard for even adults to fathom. So how do parents go about explaining such a serious obstacle to youngsters?
Keep things simple
Many financial experts advise parents to keep things simple for their children. Bankruptcy and the laws surrounding it are no doubt complex. But kids can understand the general idea behind it and what “living with less money” might entail. Explain to your little ones that sometimes parents will run into a situation where they can’t pay all the bills. Or there will be times when dinner at your kids’ favourite restaurant is not possible because money needs to be allocated to necessities — like heating bills and groceries. It’s also important that your child understands that bankruptcies happen to thousands of families each year. It’s not punishment for mistakes anyone made, but rather a simple reality given the hard economic times.
Avoid keeping secrets
Psychologists say children can sense when something is wrong or times are tough. Although you don’t have to explain the complexities of bankruptcy in detail, avoid keeping outright secrets from your children. They’ll be just as frightened to sense something is wrong and no one will tell them what it is — than if you were to be honest with them right from the beginning.
If you can’t send your kids to that pricey overnight camp up north this year, tell them it’s because money is tight — not because the entire camp closed down. If you can’t afford to buy your child that new video game this Christmas, tell them why. And then explain that although money comes and goes, the love between family members exists forever.
Use this time to teach valuable life lessons
It is never too early to instill in your kids the value of money and a hard-earned dollar. Use this difficult time to teach your children some valuable life lessons and bring depth to their thinking. Materialism and arrogance can quickly get out of hand if not addressed appropriately at a young age. The acknowledgment of financial hardship is a good way to introduce children to humble behaviours and compassion towards the less fortunate.
Also, turn the act of frugal living into a simple family activity. Many parents engage in coupon-clipping and bargain-hunting with their kids to help them feel as though everyone is chipping in for the good of the family.
Let your children make small sacrifices
Your kids will feel wonderful if they know they’re “helping out” mom and dad during tough times. But don’t have your children sacrifice things that make no difference to your bottom line. Instead, teach them to be mindful of water and electricity consumption — which will help you keep expensive household bills to a minimum. Have your children turn off the lights in the playroom when not in use … or suggest they take quick showers instead of long baths to help save on water. When visiting the local fair, let them know $10 helium balloons are not an option at this time — but that they can engage in all the free activities the event has to offer. Allowing your children to make small sacrifices will help them feel like they’re part of the team.