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Talking Through a Financial Disaster

By Rebeldad Brian Reid

I had a heck of a time getting any work done on Monday -- frozen wide-eyed as the S&P Index dropped like a rock as the market imagined a world missing huge swaths of the financial services industry. Everyone I talked to was worried. Even if the credit crunch doesn't hit personally, it will hit our neighbors and our employers in one way or another.

Adding to the unease is the fact that I don't entirely get everything that's going on. Does anyone?

That confusion makes it tougher to talk about the issue with kids. We've talked here about the typical money stuff -- allowances and chores and the like -- but while reckless corporate lending is a decent segue to a conversation about credit cards with a teen, it only gets you so far today.

How do you start to talk about a global financial meltdown? Job losses? Foreclosures? With pre-teens? Younger?

The Wall Street Journal tried to tackle this last week, suggesting different tactics for different ages. Elementary school kids need help understanding that financial calamity is not an all-or-nothing, black-or-white ordeal. Just because the Dow is fluctuating wildly and the talking heads have started screaming, it doesn't mean that they -- personally -- are headed for ruin. Middle school children can handle "a little more detail" about the news, according the WSJ. And teens can be engaged in finding solutions and taking part in the family talks that can accompany this kind of news.

Like sex, it seems like honesty is the best policy -- it's natural to want to shield kids from painful realities, but you can't let them be blindsided. I haven't started getting the questions yet. Have you? And if so, how have you handled them?

Brian Reid writes about parenting and work-family balance. You can read his blog at

By Brian Reid |  October 1, 2008; 7:00 AM ET  | Category:  Elementary Schoolers , Teens , Tweens
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September Tallies are in. Top 10 posters listed below:

17 mom of teens
18 quark
22 theoriginalmomof2
30 foamgnome
34 Emily
35 Sue
41 Whacky Weasel
49 atlmom
58 WorkingMomX
65 ArmyBrat
451 Anonymous

* Congratulations mom of teens and quark for making the list. This blog can use all the help it can get!

Posted by: BlogStats | October 1, 2008 7:41 AM | Report abuse

If my young kids aren't asking, I am not explaining. There is no need to transfer every adult anxiety onto pre-teens. (I would have a different approach if we were in danger of losing our house or jobs.)

As what to tell teenagers, I will think about that when my kids are actually teenagers.

Thanks blogstats, I see I am No. 1!

Posted by: anonthistime | October 1, 2008 8:11 AM | Report abuse

while i would agree that you don't want to transfer adult anxiety to children i think it would help to talk in general terms about what is going on. i think my job is secure & so is my husband's job but there may be others whose jobs are not so secure. this is one of those "save for the bad times because good times don't always last" sort of conversation. it can tie into my conversations with my son on being careful about spending.

Posted by: quark2 | October 1, 2008 9:11 AM | Report abuse

I don't attempt to explain it all. However, I took my kids (7 and 9) to see the American Girl movie last weekend, which happened to be about a girl living during the depression. Her father moved far away to look for work, her mother took in boarders, they gardened, sold eggs, and bartered for work done. My 7 yo said, "We would never let strangers come live in our house, would we?" I told her, "Well, I'm not planning on it, but it would be better than not having a place to live." Then we talked about why the family in the movie had to do that, and why that isn't likely for us (mainly that I have a stable job).

The fact is, they know about foreclosures. Many houses in our area are completely empty, including one two doors down. The 9 yo noticed that there is a lot of movement in and out of school as people have move out of their homes, and other people are able to purchase homes at reduced prices. We have seen the effects of bank ownership on the upkeep of houses in our neighborhood. So while I don't discuss it unless it comes up, it does come up. I think mostly it is just talk--they are curious when they know a little but not a lot about things. But I do feel the need to reassure them that I am not going to lose my job, that while we are careful with our money, we don't have to go without needed things, etc. I do not discuss with them my concern that I will have to work longer than I had previously anticipated, and that our life may change in ways I cannot yet anticipate. Uncertainty can be frightening for children.

Posted by: janedoe5 | October 1, 2008 9:14 AM | Report abuse

Ok, Quark and Jane Doe, I see how to simply explain this to my young kids.

Just like good touch, bad touch. I will tell my kids about "bad derivatives" and "good derivatives".

Posted by: anonymous_one | October 1, 2008 9:20 AM | Report abuse

I have to admit that I am worrying about much smaller things than if the world is going to end.

I think my job is safe... maybe my company will be hit by tighter credit. I don't know. But it seems safe and as long as my honey passes his tests, I suspect they won't let him go from his apprenticeship program.

Our kids are pretty shielded at the moment from world news. Their house doesn't yet have a TV and if the TV goes on in our house it is tuned to children's channels only. But then again they are 6 and 3 so how much can you really explain to them. I don't think we need to tell them times are tough because they already see two households working multiple jobs and lots of hours and there aren't too many treats in their life. So far this hasn't seemed to bother them.

Posted by: Billie_R | October 1, 2008 9:33 AM | Report abuse

My kids, age 10 and 12, asked whether I might lose my job or if their Dad was at risk of losing his job. So they are picking up on the anxiety out there. I didn't go into any details about the economy but assured them my job is pretty secure at this point. I have not told them what's happening to their college accounts!! I'm trusting the stock market will come back before they finish high school.

Posted by: annenh | October 1, 2008 9:39 AM | Report abuse

We've had a LOT of discussion about this lately with the three teens. (The 11 y.o. is bored beyond tears.) The college student is starting to wonder about the job market after she graduates; the two high schoolers want to know how solid their 529s are.

One of the high schoolers is concerned about her best friend, whose mom did very well flipping houses for a while and now may be stuck. (The mom bought a townhouse in 2001 for around 150K; sold it in 2003 for 285K and bought a single-family house for 320K; sold that in 2004 for 385K and bought another house for 420K; sold that in 2005 for 580K and bought another house for 720K; and has been trying without success to sell that house for the last 18 months. Each time this woman put down the smallest down payment they'd allow - sometimes 0 - and took ARMs, sometimes interest-only. So now she's worried about what to do; her daughter's aware enough of the concern to be able to outline it to her friends.

It's been a good opportunity to discuss risks and rewards, and how to balance the two.

Posted by: ArmyBrat1 | October 1, 2008 9:42 AM | Report abuse

I am more concerned about the whole "two little girls in a standalone freezer" horror story that is playing in our local news. I understand that radio news requires talking about tragedy, but do they have to provide these gruesome details? and the minimal warning they provide ("the following story may not be appropriate for young listeners . . .") is not sufficient to turn it down before the story starts. Can't they just say something like "the adopted daughters of (Person's name) who lives in (city of recent address) have been harmed. The ages of the children are . . . Two are not living and one is in the hospital. For additional information not appropriate for radio with young listeners in the room, please go to our website for more information. If you have information that may assiste their investigation, please contact Montgomery County police." I guess also provide the ages of the daughters.

Or am I being too protective and kids will be just fine if they hear that a mother evidently killed her kids and stuck them in the freezer-- perhaps for years? I just it's not much worse than a Grimm's Fairy Tale?

Posted by: captiolhillmom | October 1, 2008 11:24 AM | Report abuse

Actually I understand a bit about what is going on but certainly not in full. I actually think very few people, including those directly involved, understand the complex paper assets and debts that have caused this problem. If your interested in some of the nuts and bolts of the discussion go to the onbalance day when we discussed the mortgage crisis.

Anyway, the nuts and bolts of the issues would be very long and hard for even a lot of adults. But things can be fairly simplified for teenagers and frankly college students should be able to understand it on a decent level (if they are interested in it).

My college aged nephew asked me in the most simple terms explain subprime lending and why this is a problem. So I gave him the most simplified explanation I could. He is not studying economics or finance, so he only wanted a brief education in the matter.

I would gauge their interest level before jumping into a 2 hour seminar on the credit crisis that is going on.

Middle school students can understand some of the very basics. Like what is the role of the Federal Reserve, central bank, how is US markets affected and effect the global economy, what role does the different Federal agencies play in the economy and how should the current crisis affect our own decision making.

Upper elementary school students can understand basic home life economics. How do mommy and daddy make money, what expenses do they have, how do they invest, how does interest work, how does compound interest work etc... Keep simple, brief, and on grade level.

Early elementary school students can definitely grasp concepts of some families are doing well, some jobs are secure, some families face economic challenges. I think the American Girl movie is a good starting off point for very young elementary school students.

Preschool and under do not need this type of education at all. They just don't have the language or the life knowledge to process it all.

That being said, I am talking about typical children at those levels. Of course there are always some children who are very advanced and some who are delayed.

But like all things,the important thing with kids is to reassure them that you are financially stable and their general well being is not being harmed by the crisis (if this is true). No need to send them in a panic.

Of course be open and honest and be truthful when you don't understand a concept. A good way to deal with it is to say, maybe we can find out the answer together.

Posted by: foamgnome | October 1, 2008 11:25 AM | Report abuse

Sorry-- I forgot to delete the "i guess also provide the ages of the kids" sentence.

Posted by: captiolhillmom | October 1, 2008 11:25 AM | Report abuse

My family is in a situation where we're okay financially, but OrganicKid is really getting an education. See, we pretty much are able to live on my income without any problem, and my job is stable. However, OrganicGuy is a general contractor, and in 2005 started building a spec house that was to be his "showpiece". He did all the designing, and actually did most of the work himself, not trusting subs to put his "vision" in place. The house is gorgeous. Granite counters, hand-laid mahogany floors, each room having a unique design, I love the place. Of course, it was finished earlier this year. And now we can't get anyone to look at it. OrganicGuy may very well lose it to the bank. All his hard work, and for nothing. We don't have to worry about losing the house we live in, I work from home, so we don't have to worry about gas money too much, and I am well aware that my retirement funds are long term investments, so I just sigh, and think about how many shares I'll have invested when the market picks back up, and it's 25+ years to retirement still. OrganicKid is only 10, so she's not worried about college (although I am a bit), but she knows how hard OrganicGuy worked on that house, and we're all sad that no one can come make it their home. She asks questions about what's happening with the house, and we explain as best we can, without overwhelming her about construction costs, slumping markets and squeezes on credit. And, before anyone asks, no, my income isn't enough for us to cover the payments for that house and for us to move in there!

Posted by: OrganicGal1 | October 1, 2008 11:33 AM | Report abuse

want vs need
risk vs opportunity
save vs spend
living within your means
repair old or buy new/second hand

these are all discussions that you can have with children even down to the kindergarten level. i would save the good derivative/bad derivatives discussion for when they're older.

foamgnome, i think your explaination is good. my mother lived through the great depression. the american girl series is pretty good & in some ways mirrors her life. like a lot of people my mother went from a stable upper middle class life (maid, cook, gardener) to almost losing her home. the odd thing is that my father's life actually improved during the depression. his father had a government job & labor was cheap.

Posted by: quark2 | October 1, 2008 12:57 PM | Report abuse

organic girl, even if the house is taken over by the bank, it will eventually have an owner and it sounds like they will be very lucky individuals! Your guy followed his dream and his accomplishment must give him a lot of pride. Hope he takes lots of pictures so that he can use them for presentations later when the economy picks back up. Just bad timing. Meanwhile, it sounds like he has a great family life and that is what really counts.

Posted by: captiolhillmom | October 1, 2008 1:19 PM | Report abuse

To Capitolhillmom,
I wound up hiding newspapers a few years ago when headlines were all about a local Dad who murdered and buried his two children, one of whom was a high school girl who babysat for a friend of ours! I did NOT want to answer kid questions about that news event. Gruesome stuff now comes up on the radio or in conversations at school so I can't much escape answering questions, but I don't like being put in a position to explain inexplicable acts to my kids. I also don't need my kids to have nightmares because of the media's obsession with bizarre crimes. Not sure what the best way is to cope but I do try to limit their exposure to this stuff.

Posted by: annenh | October 1, 2008 2:46 PM | Report abuse

This topic hasn't come up with the boys.

DH and I had our big discussion - but I talked about that here a couple of weeks ago. We're okay, my employer is safe and stable, a financial giant that's not failing and, so far at least, not buying any of the companies that are. My job is in one of the divisions that's still increasing its customers and income.

The biggest change in our life so far is fewer meals out at restaurants, and our last dinner out we skipped the (formerly mandatory!) after-meal stop at the book store across the street.

Posted by: SueMc | October 1, 2008 2:51 PM | Report abuse

We talk a lot about the need to save and live within our means. In that sense, we are lucky. House is paid for. Cars are paid for. No credit card bills. My job as as secure as you can get in this economy. We use the crisis as a way of teaching our son that you cannot live beyond your means forever, and that overspending does catch up to people. Even so, he seems pretty oblivious to the whole crisis, since it is not affecting him. Which is fine. I really don't want him worrying about it.

Posted by: emily8 | October 1, 2008 3:41 PM | Report abuse

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