Don't Tell Your Kids

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Most parents have difficulty deciding how much of the “bad stuff” (war, death, etc.) they should tell their kids about, or when they’re old enough to hear it.

New research from Ulrike Malmendier of the University of California and Stefan Nagel of Stanford identifies another kid-sensitive subject parents might want to avoid for a while: the financial crisis.

According to this Economist article on their research, Nagel and Malmendier found that “people’s eventual appetite for risk is affected by the economic environment during their childhood, well before financial matters could possibly have been of interest.”

In short, what you tell your kids about the current financial crisis — or what they discover on their own — could affect what financial choices they make throughout their lives.

But grown-ups aren’t immune either. The study found, for instance, that “people who had experienced lower stock-market returns over the course of their lives put a smaller fraction of their money into stocks than people who had lived, on average, in times when stocks had done better,” reports the Economist.

And so, to readers of this blog with children: have you discussed the financial crisis with them, and if so, how did they respond?

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  1. MD says:

    The new stimulus plan is set at $800 billion. Now there are little over 300 billion people in the USA (that’s including everybody who does or doesn’t pay taxes). So if we divide the stimulus plan evenly among ourselves, that comes to a little under $2700 each. Why trickle down, why not trickle up?

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  2. Sam says:

    Given the current situation worldwide (I live in Mexico City), I think my family is lucky because both my wife and me still have our jobs and haven’t been serioulsy affected by the financial crisis. However, we believe in what they say: Expect the best and prepare for the worst.

    In this scenario, we have reduced some expenses in order to increase our savings. This includes the occasional hot wheels car (or similar toys) my wife bought for our 6 y/o son, almost everytime he went with her to do the weekly grocery shopping at Wal Mart.

    By doing so, we have explained our son that it is good to save money and be prepared for tougher times. I think we’ve done a good job at making him understand, at his intellectual level, and doing so without making him worry excesively and assuring him that he will always have his basic necessities covered.

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  3. Sam X Renick says:

    Kids are a lot smarter than adults generally give them credit for. It seems to me parents might want to be proactive on this one and shape the discussion, naturally as appropriate.

    Sam X Renick
    http://www.itsahabit.com
    http://www.sammyrabbitblog.com

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  4. BSK says:

    So much of this depends on the age of the child. There are developmental milestones that must be reached in order to understand and fully comprehend different types of information in a way that is meaningful. The approach, if there is one at all, must be geared towards the age of the child. Generally speaking, parents and caregivers who are thoughtful and deliberate in their approach to such topics are most likely thought and deliberate in their approach to raising their child, increasing the likelihood that the child will grow up to make informed, responsible decisions. And, as someone pointed out earlier, conversations such as these are generally part of a larger context. Words only go so far with children; if the surrounding environment doesn’t support what they are hearing, the are unlikely to internalize the messages being communicated verbally.

    I say this as a teacher of young children who has had to lead many difficult conversations surrounding death, poverty, and racism.

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  5. Justin James says:

    The last thing I want is for my children to make the same kinds of mistakes that led to this crisis. Having financially risk adverse children is a *good* thing. Do you not warn your child about the dangers of climbing trees, in the hopes that we can raise a generation of acrobats? Didn’t think so. Maybe if the current generation of financial “experts” remembered the Great Depression we wouldn’t have this mess.

    J.Ja

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  6. Lise says:

    We don’t necessarily talk about it, but my kids can’t help but be affected. Many of their friends’ parents have lost their jobs, and that comes up even in third grade. My younger daughter’s father hasn’t worked steadily in years, and she is used to the fact that Daddy can’t afford things like going to McDonalds or buying a new coat every winter, but Mommy can.

    My current husband and I are both still working and both are financially conservative (don’t carry a lot of debt, put aside a lot for our future), so my kids have always had the lessons of being financially responsible and not spending when you don’t need to. I don’t see any reason to scare them unnecessarily.

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  7. econobiker says:

    I try and educate my sons (age 4 and 8) to save the majority of their money though they have money to spend and give to a church. (75% savings, 15% spending, 10% church.)

    I have told them that some people also made mistakes in spending money that those people received and how some banks had people who made mistakes in figuring out that the people could have money for a house.

    When I caught the two boys singing a catchy jingle from a TV commercial for an automotive title loan business, I instructed them that the place rips people off by giving a person less money than his/her car is worth and then the business will steal the car back if the person doesn’t pay in time. I also have explained the concept by using the analogie of the sons loaning their toys to a friend for money and then taking the toy back if the friend didn’t pay back the money.

    And number 6 Sap: I had the mother of my sons (now ex-wife) commit financial infidelity on me several times and always write it off as “simple financial mistakes.”. I would reckon that your spouse has the same kind of spending addiction. You should treat it as an illness much like alcoholism or drug addiction and get your spouse counselling for dealing with it so she can get real with life. Otherwise she could flounder if her support network goes away/dies.

    I think that my former spouse is now finally realizing that she cannot blame me for HER spending problems anymore. I let her father be the co-dependant now…good ridance.

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  8. E Olson says:

    Is this on par with saying the first actor you see play James Bond feels like the “real” James Bond to you?

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