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Money talks for kids

Keeping children informed about financial status is important

Keeping children informed about financial status is important

October 17, 2008|By TIFFANY ARNOLD

As parents brace for financial troubles, local counselors say they should also be considering how to explain what's going on to their kids.

"You need to be upfront with the kids," said Dave Jordan, executive director of Washington County Community Action Council in Hagerstown.

The Community Action Council (CAC) is an approved housing counseling agency through the U.S. Department of Housing and Urban Development. The agency has been on the front line amid the national housing crises, as more and more local families worry about making their mortgage payments and seek out advice.

Donna Rose, placement housing counselor, said CAC had 85 housing-related cases from October 2007 through September 2008. That compares with 15 the year before, Rose said.

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Children, CAC counselors said, should not be blissfully unaware about the family's money problems. Sooner or later, they'll detect that something is not right.

"If you're in a situation where you're used to eating steak every night and it goes to eating hotdogs, then you need to have a discussion," Jordan said.

"Or if the kid comes home says, 'I was at Billy's house and we had steak for dinner. Why don't we ever have steak?' There again, you have to have an age-appropriate discussion on why that is," Jordan said.

How to break the news

Jordan said while you have to put it in terms your child will understand, the gist of conversation should go something like this:

"We're having some financial difficulties right now and we really can't afford to do _______. When things get better, maybe we can."

If the child is young, his or her response might be: "Why can't you just write a check?"

This is a good time to have the How Money Works talk, Jordan said, as children might perceive checks and credit cards as "free" money. Jordan said children should understand that in order to use checks or credit cards, there needs to be money in the bank to cover it.

Explaining how money works

CAC placement housing counselor Linda Faulder said setting up a chore chart and an allowance system is a good way to teach young children about how money works.

"If you have someone who's 5 years old and you can take them to the dollar store, and if they've earned $2, they're more than happy," Faulder said.

"That way you're not always running into kids wanting, and wanting and wanting," she said. "You can just throw it back at them - how much money do you have saved?"

Faulder said when times get harder, it's easier to explain to kids why Mom and Dad have to cut back on the spending because they already have a basic understanding of how money works.

Defusing peer pressure

For older kids, Jordan said that peer pressure becomes an issue, as they wonder why they can't get designer jeans or the latest gaming system that they see their friends getting.

Faulder remembered when Jordache jeans were the craze. Her daughter wanted some, but Faulder was a single mother and had to be judicious about her spending.

"I had to sit her down and tell her, this is your choice: You can get one pair of Jordache (jeans for $40), or we can go down to Kmart and get four of the $10 pair," she said, "and then you need to be responsible for washing that $40 pair of jeans out every night. That quickly put things into perspective for her."

How these situations are presented to older kids matter. Parents should not take a "No, because I said so" stance, Jordan said.

"Just because Johnny gets the Nike shoes and what not doesn't mean we're trying to deprive you," Jordan said. "Parents have to talk about peer pressure."

Light at the end of the tunnel?

Even as stocks continue to tank and fears about making mortgage payments mount, housing counselors say there is some hope. But improvement in the U.S. economy will not occur overnight.

Jordan said he doesn't anticipate seeing a decline in the number of CAC cases for at least another year.

"I still think we're at the tip of the iceberg," he said. There's still a lot more to come."

But lenders have had a change of heart in how they react to people facing foreclosures, said Barbara Spielman, housing adviser at The Hagerstown Home Store.

She said lenders had been playing hardball - "send us our money." But now, she said, they're saying "OK, let's see how we can work this out."

Homeowners are also getting government support through the Federal Housing Administration's HOPE for Homeowners program, enacted by Congress to help people at risk of default and foreclosure. The federal program took effect Oct. 1.

There's also Maryland's HOPE Initiative, Spielman said.

"Government is not just helping the big guys," she said. "They're actually getting to the little guys on the street."

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